Correlation Between Kingfa Science and Cambridge Technology

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

Diversification Opportunities for Kingfa Science and Cambridge Technology

0.81

Correlation Coefficient

Kingfa Science  Cambridge Technology

Very poor diversification

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

Pair Corralation between Kingfa Science and Cambridge Technology

Assuming the 90 days trading horizon Kingfa Science Technology is expected to generate 0.78 times more return on investment than Cambridge Technology. However, Kingfa Science Technology is 1.28 times less risky than Cambridge Technology. It trades about 0.08 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.06 per unit of risk. If you would invest  312,330  in Kingfa Science Technology on October 5, 2024 and sell it today you would earn a total of  31,170  from holding Kingfa Science Technology or generate 9.98% return on investment over 90 days.

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

Kingfa Science Technology  vs.  Cambridge Technology Enterpris

Kingfa Science Technology

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cambridge Technology

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cambridge Technology Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cambridge Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kingfa Science and Cambridge Technology

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

The idea behind Kingfa Science Technology and Cambridge Technology Enterprises 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.