Correlation Between Kuke Music and Four Seasons

Can any of the company-specific risk be diversified away by investing in both Kuke Music and Four Seasons 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 Kuke Music and Four Seasons into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kuke Music Holding and Four Seasons Education, you can compare the effects of market volatilities on Kuke Music and Four Seasons 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 Kuke Music with a short position of Four Seasons. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuke Music and Four Seasons.

Diversification Opportunities for Kuke Music and Four Seasons

0.61

Correlation Coefficient

Kuke Music  Four Seasons

Poor diversification

The 3 months correlation between Kuke and Four is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kuke Music Holding and Four Seasons Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Four Seasons Education and Kuke Music 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 Kuke Music Holding are associated (or correlated) with Four Seasons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Four Seasons Education has no effect on the direction of Kuke Music i.e., Kuke Music and Four Seasons go up and down completely randomly.

Pair Corralation between Kuke Music and Four Seasons

Given the investment horizon of 90 days Kuke Music is expected to generate 8.35 times less return on investment than Four Seasons. But when comparing it to its historical volatility, Kuke Music Holding is 5.89 times less risky than Four Seasons. It trades about 0.04 of its potential returns per unit of risk. Four Seasons Education is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  727.00  in Four Seasons Education on October 4, 2024 and sell it today you would earn a total of  313.00  from holding Four Seasons Education or generate 43.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	83.03%
Values	Daily Returns

Kuke Music Holding  vs.  Four Seasons Education

Kuke Music Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuke Music Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Kuke Music is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Four Seasons Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Four Seasons Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Kuke Music and Four Seasons

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

The idea behind Kuke Music Holding and Four Seasons Education 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.