Correlation Between Kingdee International and NVR

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

Diversification Opportunities for Kingdee International and NVR

-0.14

Correlation Coefficient

Kingdee International  NVR

Good diversification

The 3 months correlation between Kingdee and NVR is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc 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 NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of Kingdee International i.e., Kingdee International and NVR go up and down completely randomly.

Pair Corralation between Kingdee International and NVR

Assuming the 90 days trading horizon Kingdee International Software is expected to under-perform the NVR. In addition to that, Kingdee International is 1.6 times more volatile than NVR Inc. It trades about -0.57 of its total potential returns per unit of risk. NVR Inc is currently generating about -0.38 per unit of volatility. If you would invest  845,000  in NVR Inc on October 10, 2024 and sell it today you would lose (80,000) from holding NVR Inc or give up 9.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kingdee International Software  vs.  NVR Inc

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 nearly stable forward indicators, Kingdee International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NVR Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NVR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kingdee International and NVR

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

The idea behind Kingdee International Software and NVR Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.