Correlation Between Kingfa Science and Archean Chemical

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

Diversification Opportunities for Kingfa Science and Archean Chemical

0.07

Correlation Coefficient

Kingfa Science  Archean Chemical

Significant diversification

The 3 months correlation between Kingfa and Archean is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Archean Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archean Chemical Ind 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 Archean Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archean Chemical Ind has no effect on the direction of Kingfa Science i.e., Kingfa Science and Archean Chemical go up and down completely randomly.

Pair Corralation between Kingfa Science and Archean Chemical

Assuming the 90 days trading horizon Kingfa Science Technology is expected to generate 1.52 times more return on investment than Archean Chemical. However, Kingfa Science is 1.52 times more volatile than Archean Chemical Industries. It trades about 0.19 of its potential returns per unit of risk. Archean Chemical Industries is currently generating about -0.04 per unit of risk. If you would invest  307,875  in Kingfa Science Technology on October 6, 2024 and sell it today you would earn a total of  57,475  from holding Kingfa Science Technology or generate 18.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Kingfa Science Technology  vs.  Archean Chemical Industries

Kingfa Science Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, Kingfa Science sustained solid returns over the last few months and may actually be approaching a breakup point.

Archean Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archean Chemical Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Archean Chemical is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kingfa Science and Archean Chemical

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

The idea behind Kingfa Science Technology and Archean Chemical Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.