Correlation Between Kuke Music and Lixiang Education

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

Diversification Opportunities for Kuke Music and Lixiang Education

-0.62

Correlation Coefficient

Kuke Music  Lixiang Education

Excellent diversification

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

Pair Corralation between Kuke Music and Lixiang Education

Given the investment horizon of 90 days Kuke Music is expected to generate 5.3 times less return on investment than Lixiang Education. But when comparing it to its historical volatility, Kuke Music Holding is 1.07 times less risky than Lixiang Education. It trades about 0.04 of its potential returns per unit of risk. Lixiang Education Holding is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  472.00  in Lixiang Education Holding on December 28, 2024 and sell it today you would earn a total of  861.00  from holding Lixiang Education Holding or generate 182.42% return on investment over 90 days.

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

Kuke Music Holding  vs.  Lixiang Education Holding

Kuke Music Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuke Music Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward-looking signals, Kuke Music exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lixiang Education Holding

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lixiang Education Holding are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Lixiang Education demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuke Music and Lixiang Education

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

The idea behind Kuke Music Holding and Lixiang Education Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.