Correlation Between Kingfa Science and Action Construction

Can any of the company-specific risk be diversified away by investing in both Kingfa Science and Action Construction 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 Kingfa Science and Action Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingfa Science Technology and Action Construction Equipment, you can compare the effects of market volatilities on Kingfa Science and Action Construction 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 Kingfa Science with a short position of Action Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingfa Science and Action Construction.

Diversification Opportunities for Kingfa Science and Action Construction

0.81

Correlation Coefficient

Kingfa Science  Action Construction

Very poor diversification

The 3 months correlation between Kingfa and Action is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Action Construction Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Action Construction and Kingfa Science 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 Kingfa Science Technology are associated (or correlated) with Action Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Action Construction has no effect on the direction of Kingfa Science i.e., Kingfa Science and Action Construction go up and down completely randomly.

Pair Corralation between Kingfa Science and Action Construction

Assuming the 90 days trading horizon Kingfa Science Technology is expected to generate 1.08 times more return on investment than Action Construction. However, Kingfa Science is 1.08 times more volatile than Action Construction Equipment. It trades about -0.02 of its potential returns per unit of risk. Action Construction Equipment is currently generating about -0.06 per unit of risk. If you would invest  311,210  in Kingfa Science Technology on November 29, 2024 and sell it today you would lose (19,280) from holding Kingfa Science Technology or give up 6.2% of portfolio value over 90 days.

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

Kingfa Science Technology  vs.  Action Construction Equipment

Kingfa Science Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingfa Science Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Kingfa Science is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Action Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Action Construction Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Kingfa Science and Action Construction

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

The idea behind Kingfa Science Technology and Action Construction Equipment 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.