Correlation Between Kingdee International and Liberty Northwest

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

Diversification Opportunities for Kingdee International and Liberty Northwest

-0.15

Correlation Coefficient

Kingdee International  Liberty Northwest

Good diversification

The 3 months correlation between Kingdee and Liberty is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Liberty Northwest Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Northwest Bancorp 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 Liberty Northwest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Northwest Bancorp has no effect on the direction of Kingdee International i.e., Kingdee International and Liberty Northwest go up and down completely randomly.

Pair Corralation between Kingdee International and Liberty Northwest

Assuming the 90 days horizon Kingdee International Software is expected to under-perform the Liberty Northwest. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kingdee International Software is 1.36 times less risky than Liberty Northwest. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Liberty Northwest Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  540.00  in Liberty Northwest Bancorp on October 10, 2024 and sell it today you would earn a total of  9.00  from holding Liberty Northwest Bancorp or generate 1.67% return on investment over 90 days.

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

Kingdee International Software  vs.  Liberty Northwest Bancorp

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 uncertain 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.

Liberty Northwest Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Northwest Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Liberty Northwest is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kingdee International and Liberty Northwest

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

The idea behind Kingdee International Software and Liberty Northwest Bancorp 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.

Check out your portfolio center.

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.