Correlation Between Kingdee International and Awilco Drilling

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

Diversification Opportunities for Kingdee International and Awilco Drilling

0.12

Correlation Coefficient

Kingdee International  Awilco Drilling

Average diversification

The 3 months correlation between Kingdee and Awilco is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Awilco Drilling PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awilco Drilling PLC 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 Awilco Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awilco Drilling PLC has no effect on the direction of Kingdee International i.e., Kingdee International and Awilco Drilling go up and down completely randomly.

Pair Corralation between Kingdee International and Awilco Drilling

Assuming the 90 days horizon Kingdee International Software is expected to generate 0.99 times more return on investment than Awilco Drilling. However, Kingdee International Software is 1.01 times less risky than Awilco Drilling. It trades about -0.16 of its potential returns per unit of risk. Awilco Drilling PLC is currently generating about -0.17 per unit of risk. If you would invest  119.00  in Kingdee International Software on October 11, 2024 and sell it today you would lose (9.00) from holding Kingdee International Software or give up 7.56% of portfolio value over 90 days.

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

Kingdee International Software  vs.  Awilco Drilling PLC

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 technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Awilco Drilling PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kingdee International and Awilco Drilling

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

The idea behind Kingdee International Software and Awilco Drilling PLC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.