Correlation Between REC and Kingfa Science

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

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

Diversification Opportunities for REC and Kingfa Science

0.48

Correlation Coefficient

REC  Kingfa Science

Very weak diversification

The 3 months correlation between REC and Kingfa is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding REC Limited 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 REC 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 REC Limited 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 REC i.e., REC and Kingfa Science go up and down completely randomly.

Pair Corralation between REC and Kingfa Science

Assuming the 90 days trading horizon REC Limited is expected to generate 1.04 times more return on investment than Kingfa Science. However, REC is 1.04 times more volatile than Kingfa Science Technology. It trades about 0.08 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.06 per unit of risk. If you would invest  27,913  in REC Limited on September 26, 2024 and sell it today you would earn a total of  22,827  from holding REC Limited or generate 81.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.34%
Values	Daily Returns

REC Limited  vs.  Kingfa Science Technology

REC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, REC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 uncertain technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with REC and Kingfa Science

The main advantage of trading using opposite REC and Kingfa Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REC 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 REC Limited 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.