Correlation Between Kingfa Science and Thomas Scott

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

Diversification Opportunities for Kingfa Science and Thomas Scott

0.63

Correlation Coefficient

Kingfa Science  Thomas Scott

Poor diversification

The 3 months correlation between Kingfa and Thomas is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Thomas Scott Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomas Scott 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 Thomas Scott. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomas Scott Limited has no effect on the direction of Kingfa Science i.e., Kingfa Science and Thomas Scott go up and down completely randomly.

Pair Corralation between Kingfa Science and Thomas Scott

Assuming the 90 days trading horizon Kingfa Science is expected to generate 12.03 times less return on investment than Thomas Scott. But when comparing it to its historical volatility, Kingfa Science Technology is 1.68 times less risky than Thomas Scott. It trades about 0.05 of its potential returns per unit of risk. Thomas Scott Limited is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  23,270  in Thomas Scott Limited on October 2, 2024 and sell it today you would earn a total of  23,802  from holding Thomas Scott Limited or generate 102.29% 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.  Thomas Scott Limited

Kingfa Science Technology

Risk-Adjusted Performance

3 of 100

Insignificant

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 uncertain technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thomas Scott Limited

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thomas Scott Limited are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Thomas Scott exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingfa Science and Thomas Scott

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

The idea behind Kingfa Science Technology and Thomas Scott 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.