Correlation Between Kingdee International and TRAVEL +

Can any of the company-specific risk be diversified away by investing in both Kingdee International and TRAVEL + 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 TRAVEL + 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 TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Kingdee International and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and TRAVEL +.

Diversification Opportunities for Kingdee International and TRAVEL +

0.42

Correlation Coefficient

Kingdee International  TRAVEL +

Very weak diversification

The 3 months correlation between Kingdee and TRAVEL is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Kingdee International i.e., Kingdee International and TRAVEL + go up and down completely randomly.

Pair Corralation between Kingdee International and TRAVEL +

Assuming the 90 days trading horizon Kingdee International Software is expected to under-perform the TRAVEL +. In addition to that, Kingdee International is 1.93 times more volatile than TRAVEL LEISURE DL 01. It trades about -0.02 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.05 per unit of volatility. If you would invest  3,360  in TRAVEL LEISURE DL 01 on October 10, 2024 and sell it today you would earn a total of  1,460  from holding TRAVEL LEISURE DL 01 or generate 43.45% return on investment over 90 days.

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

Kingdee International Software  vs.  TRAVEL LEISURE DL 01

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

TRAVEL LEISURE DL

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingdee International and TRAVEL +

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

The idea behind Kingdee International Software and TRAVEL LEISURE DL 01 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.