Correlation Between Kingfa Science and Power FinanceLimited

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

Diversification Opportunities for Kingfa Science and Power FinanceLimited

0.71

Correlation Coefficient

Kingfa Science  Power FinanceLimited

Poor diversification

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

Pair Corralation between Kingfa Science and Power FinanceLimited

Assuming the 90 days trading horizon Kingfa Science Technology is expected to under-perform the Power FinanceLimited. In addition to that, Kingfa Science is 1.13 times more volatile than Power Finance. It trades about -0.06 of its total potential returns per unit of risk. Power Finance is currently generating about -0.01 per unit of volatility. If you would invest  43,245  in Power Finance on December 30, 2024 and sell it today you would lose (1,820) from holding Power Finance or give up 4.21% 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.  Power Finance

Kingfa Science Technology

Risk-Adjusted Performance

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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Power FinanceLimited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Kingfa Science and Power FinanceLimited

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

The idea behind Kingfa Science Technology and Power Finance 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.