Correlation Between Kuke Music and Wah Fu

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

Diversification Opportunities for Kuke Music and Wah Fu

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Kuke and Wah is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kuke Music Holding and Wah Fu Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Fu 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 Wah Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Fu Education has no effect on the direction of Kuke Music i.e., Kuke Music and Wah Fu go up and down completely randomly.

Pair Corralation between Kuke Music and Wah Fu

Given the investment horizon of 90 days Kuke Music Holding is expected to generate 2.27 times more return on investment than Wah Fu. However, Kuke Music is 2.27 times more volatile than Wah Fu Education. It trades about 0.04 of its potential returns per unit of risk. Wah Fu Education is currently generating about 0.0 per unit of risk. If you would invest  60.00  in Kuke Music Holding on October 4, 2024 and sell it today you would lose (16.00) from holding Kuke Music Holding or give up 26.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Kuke Music Holding  vs.  Wah Fu Education

 Performance 
       Timeline  
Kuke Music Holding 

Risk-Adjusted Performance

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Weak
 
Strong
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.
Wah Fu Education 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wah Fu Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Kuke Music and Wah Fu Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kuke Music and Wah Fu

The main advantage of trading using opposite Kuke Music and Wah Fu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuke Music position performs unexpectedly, Wah Fu 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 Wah Fu will offset losses from the drop in Wah Fu's long position.
The idea behind Kuke Music Holding and Wah Fu 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.
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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