Correlation Between Kingdee International and GuocoLand

Can any of the company-specific risk be diversified away by investing in both Kingdee International and GuocoLand 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 GuocoLand 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 GuocoLand Limited, you can compare the effects of market volatilities on Kingdee International and GuocoLand 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 GuocoLand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and GuocoLand.

Diversification Opportunities for Kingdee International and GuocoLand

0.11

Correlation Coefficient

Kingdee International  GuocoLand

Average diversification

The 3 months correlation between Kingdee and GuocoLand is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and GuocoLand Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuocoLand Limited 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 GuocoLand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuocoLand Limited has no effect on the direction of Kingdee International i.e., Kingdee International and GuocoLand go up and down completely randomly.

Pair Corralation between Kingdee International and GuocoLand

Assuming the 90 days trading horizon Kingdee International Software is expected to under-perform the GuocoLand. In addition to that, Kingdee International is 8.98 times more volatile than GuocoLand Limited. It trades about -0.02 of its total potential returns per unit of risk. GuocoLand Limited is currently generating about 0.01 per unit of volatility. If you would invest  102.00  in GuocoLand Limited on October 11, 2024 and sell it today you would earn a total of  2.00  from holding GuocoLand Limited or generate 1.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Kingdee International Software  vs.  GuocoLand Limited

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 unsteady 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.

GuocoLand Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GuocoLand Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GuocoLand is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kingdee International and GuocoLand

The main advantage of trading using opposite Kingdee International and GuocoLand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International position performs unexpectedly, GuocoLand 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 GuocoLand will offset losses from the drop in GuocoLand's long position.

The idea behind Kingdee International Software and GuocoLand Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.