Correlation Between Power Mech and Kingfa Science

Can any of the company-specific risk be diversified away by investing in both Power Mech and Kingfa Science 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 Power Mech and Kingfa Science into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Mech Projects and Kingfa Science Technology, you can compare the effects of market volatilities on Power Mech and Kingfa Science 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 Power Mech with a short position of Kingfa Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Mech and Kingfa Science.

Diversification Opportunities for Power Mech and Kingfa Science

0.14

Correlation Coefficient

Power Mech  Kingfa Science

Average diversification

The 3 months correlation between Power and Kingfa is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Power Mech Projects and Kingfa Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfa Science Technology and Power Mech 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 Power Mech Projects are associated (or correlated) with Kingfa Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfa Science Technology has no effect on the direction of Power Mech i.e., Power Mech and Kingfa Science go up and down completely randomly.

Pair Corralation between Power Mech and Kingfa Science

Assuming the 90 days trading horizon Power Mech Projects is expected to generate 2.81 times more return on investment than Kingfa Science. However, Power Mech is 2.81 times more volatile than Kingfa Science Technology. It trades about 0.05 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.12 per unit of risk. If you would invest  239,031  in Power Mech Projects on October 9, 2024 and sell it today you would earn a total of  34,629  from holding Power Mech Projects or generate 14.49% return on investment over 90 days.

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

Power Mech Projects  vs.  Kingfa Science Technology

Power Mech Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Mech Projects has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kingfa Science Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Power Mech and Kingfa Science

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

The idea behind Power Mech Projects and Kingfa Science Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.