Correlation Between Kingfa Science and MIC Electronics

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

Diversification Opportunities for Kingfa Science and MIC Electronics

0.71

Correlation Coefficient

Kingfa Science  MIC Electronics

Poor diversification

The 3 months correlation between Kingfa and MIC is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and MIC Electronics Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MIC Electronics 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 MIC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MIC Electronics has no effect on the direction of Kingfa Science i.e., Kingfa Science and MIC Electronics go up and down completely randomly.

Pair Corralation between Kingfa Science and MIC Electronics

Assuming the 90 days trading horizon Kingfa Science Technology is expected to generate 1.1 times more return on investment than MIC Electronics. However, Kingfa Science is 1.1 times more volatile than MIC Electronics Limited. It trades about 0.33 of its potential returns per unit of risk. MIC Electronics Limited is currently generating about -0.03 per unit of risk. If you would invest  293,965  in Kingfa Science Technology on September 24, 2024 and sell it today you would earn a total of  53,790  from holding Kingfa Science Technology or generate 18.3% return on investment over 90 days.

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

Kingfa Science Technology  vs.  MIC Electronics Limited

Kingfa Science Technology

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

MIC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MIC Electronics Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Kingfa Science and MIC Electronics

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

The idea behind Kingfa Science Technology and MIC Electronics Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..