Correlation Between Kingfa Science and Modi Rubber

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

Diversification Opportunities for Kingfa Science and Modi Rubber

0.62

Correlation Coefficient

Kingfa Science  Modi Rubber

Poor diversification

The 3 months correlation between Kingfa and Modi is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Modi Rubber Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modi Rubber Limited 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 Modi Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modi Rubber Limited has no effect on the direction of Kingfa Science i.e., Kingfa Science and Modi Rubber go up and down completely randomly.

Pair Corralation between Kingfa Science and Modi Rubber

Assuming the 90 days trading horizon Kingfa Science Technology is expected to under-perform the Modi Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Kingfa Science Technology is 1.08 times less risky than Modi Rubber. The stock trades about -0.03 of its potential returns per unit of risk. The Modi Rubber Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  12,949  in Modi Rubber Limited on September 2, 2024 and sell it today you would lose (50.00) from holding Modi Rubber Limited or give up 0.39% of portfolio value over 90 days.

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

Kingfa Science Technology  vs.  Modi Rubber Limited

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

Modi Rubber Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modi Rubber Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Modi Rubber is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kingfa Science and Modi Rubber

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

The idea behind Kingfa Science Technology and Modi Rubber 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.