Correlation Between Kingdee International and Palo Alto

Can any of the company-specific risk be diversified away by investing in both Kingdee International and Palo Alto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kingdee International and Palo Alto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingdee International Software and Palo Alto Networks, you can compare the effects of market volatilities on Kingdee International and Palo Alto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kingdee International with a short position of Palo Alto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and Palo Alto.

Diversification Opportunities for Kingdee International and Palo Alto

0.36

Correlation Coefficient

Kingdee International  Palo Alto

Weak diversification

The 3 months correlation between Kingdee and Palo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks and Kingdee International is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kingdee International Software are associated (or correlated) with Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of Kingdee International i.e., Kingdee International and Palo Alto go up and down completely randomly.

Pair Corralation between Kingdee International and Palo Alto

Assuming the 90 days trading horizon Kingdee International is expected to generate 7.52 times less return on investment than Palo Alto. In addition to that, Kingdee International is 2.15 times more volatile than Palo Alto Networks. It trades about 0.01 of its total potential returns per unit of risk. Palo Alto Networks is currently generating about 0.08 per unit of volatility. If you would invest  13,975  in Palo Alto Networks on October 9, 2024 and sell it today you would earn a total of  3,773  from holding Palo Alto Networks or generate 27.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Kingdee International Software  vs.  Palo Alto Networks

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Palo Alto Networks

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Palo Alto may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kingdee International and Palo Alto

The main advantage of trading using opposite Kingdee International and Palo Alto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International position performs unexpectedly, Palo Alto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Palo Alto will offset losses from the drop in Palo Alto's long position.

The idea behind Kingdee International Software and Palo Alto Networks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Volatility Analysis module to get historical volatility and risk analysis based on latest market data.