Correlation Between Kingdee International and MSP Recovery

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

Diversification Opportunities for Kingdee International and MSP Recovery

-0.16

Correlation Coefficient

Kingdee International  MSP Recovery

Good diversification

The 3 months correlation between Kingdee and MSP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and MSP Recovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Recovery 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 MSP Recovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Recovery has no effect on the direction of Kingdee International i.e., Kingdee International and MSP Recovery go up and down completely randomly.

Pair Corralation between Kingdee International and MSP Recovery

Assuming the 90 days horizon Kingdee International Software is expected to under-perform the MSP Recovery. But the pink sheet apears to be less risky and, when comparing its historical volatility, Kingdee International Software is 7.61 times less risky than MSP Recovery. The pink sheet trades about -0.22 of its potential returns per unit of risk. The MSP Recovery is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  202.00  in MSP Recovery on October 11, 2024 and sell it today you would earn a total of  8.00  from holding MSP Recovery or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Kingdee International Software  vs.  MSP Recovery

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.

MSP Recovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSP Recovery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile technical and fundamental indicators, MSP Recovery may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kingdee International and MSP Recovery

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

The idea behind Kingdee International Software and MSP Recovery 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.