Correlation Between Kang Yong and SCB X

Can any of the company-specific risk be diversified away by investing in both Kang Yong and SCB X 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 Kang Yong and SCB X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kang Yong Electric and SCB X Public, you can compare the effects of market volatilities on Kang Yong and SCB X 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 Kang Yong with a short position of SCB X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kang Yong and SCB X.

Diversification Opportunities for Kang Yong and SCB X

0.16

Correlation Coefficient

Kang Yong  SCB X

Average diversification

The 3 months correlation between Kang and SCB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Kang Yong Electric and SCB X Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCB X Public and Kang Yong 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 Kang Yong Electric are associated (or correlated) with SCB X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCB X Public has no effect on the direction of Kang Yong i.e., Kang Yong and SCB X go up and down completely randomly.

Pair Corralation between Kang Yong and SCB X

Assuming the 90 days trading horizon Kang Yong is expected to generate 2.15 times less return on investment than SCB X. But when comparing it to its historical volatility, Kang Yong Electric is 1.5 times less risky than SCB X. It trades about 0.08 of its potential returns per unit of risk. SCB X Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11,750  in SCB X Public on December 28, 2024 and sell it today you would earn a total of  800.00  from holding SCB X Public or generate 6.81% return on investment over 90 days.

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

Kang Yong Electric  vs.  SCB X Public

Kang Yong Electric

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kang Yong Electric are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Kang Yong is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

SCB X Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, SCB X may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kang Yong and SCB X

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

The idea behind Kang Yong Electric and SCB X Public 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.