Correlation Between Kingdee International and Global Fashion

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

Diversification Opportunities for Kingdee International and Global Fashion

-0.54

Correlation Coefficient

Kingdee International  Global Fashion

Excellent diversification

The 3 months correlation between Kingdee and Global is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of Kingdee International i.e., Kingdee International and Global Fashion go up and down completely randomly.

Pair Corralation between Kingdee International and Global Fashion

Assuming the 90 days trading horizon Kingdee International Software is expected to generate 0.69 times more return on investment than Global Fashion. However, Kingdee International Software is 1.45 times less risky than Global Fashion. It trades about -0.02 of its potential returns per unit of risk. Global Fashion Group is currently generating about -0.04 per unit of risk. If you would invest  209.00  in Kingdee International Software on October 24, 2024 and sell it today you would lose (100.00) from holding Kingdee International Software or give up 47.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Kingdee International Software  vs.  Global Fashion Group

Kingdee International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

Global Fashion Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Fashion Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Kingdee International and Global Fashion

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

The idea behind Kingdee International Software and Global Fashion Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..