Correlation Between Kingfa Science and Diamond Power

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

Diversification Opportunities for Kingfa Science and Diamond Power

-0.2

Correlation Coefficient

Kingfa Science  Diamond Power

Good diversification

The 3 months correlation between Kingfa and Diamond is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Diamond Power Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Power Infras 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 Diamond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Power Infras has no effect on the direction of Kingfa Science i.e., Kingfa Science and Diamond Power go up and down completely randomly.

Pair Corralation between Kingfa Science and Diamond Power

Assuming the 90 days trading horizon Kingfa Science Technology is expected to under-perform the Diamond Power. But the stock apears to be less risky and, when comparing its historical volatility, Kingfa Science Technology is 57.75 times less risky than Diamond Power. The stock trades about -0.04 of its potential returns per unit of risk. The Diamond Power Infrastructure is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  13,668  in Diamond Power Infrastructure on September 18, 2024 and sell it today you would earn a total of  2,737  from holding Diamond Power Infrastructure or generate 20.02% return on investment over 90 days.

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

Kingfa Science Technology  vs.  Diamond Power Infrastructure

Kingfa Science Technology

Risk-Adjusted Performance

0 of 100

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Diamond Power Infras

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Power Infrastructure are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Diamond Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingfa Science and Diamond Power

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

The idea behind Kingfa Science Technology and Diamond Power Infrastructure 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.