Correlation Between Kingfa Science and REC

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

Diversification Opportunities for Kingfa Science and REC

0.48

Correlation Coefficient

Kingfa Science  REC

Very weak diversification

The 3 months correlation between Kingfa and REC is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and REC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC 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 REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC Limited has no effect on the direction of Kingfa Science i.e., Kingfa Science and REC go up and down completely randomly.

Pair Corralation between Kingfa Science and REC

Assuming the 90 days trading horizon Kingfa Science is expected to generate 1.43 times less return on investment than REC. In addition to that, Kingfa Science is 1.01 times more volatile than REC Limited. It trades about 0.09 of its total potential returns per unit of risk. REC Limited is currently generating about 0.12 per unit of volatility. If you would invest  11,075  in REC Limited on September 26, 2024 and sell it today you would earn a total of  39,665  from holding REC Limited or generate 358.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Kingfa Science Technology  vs.  REC Limited

Kingfa Science Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 4 (%) 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 January 2025.

REC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, REC 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 REC

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

The idea behind Kingfa Science Technology and REC 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.