Correlation Between ReTo Eco and Kingboard Chemical

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

By analyzing existing cross correlation between ReTo Eco Solutions and Kingboard Chemical Holdings, you can compare the effects of market volatilities on ReTo Eco and Kingboard Chemical 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 ReTo Eco with a short position of Kingboard Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ReTo Eco and Kingboard Chemical.

Diversification Opportunities for ReTo Eco and Kingboard Chemical

-0.32

Correlation Coefficient

ReTo Eco  Kingboard Chemical

Very good diversification

The 3 months correlation between ReTo and Kingboard is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions and Kingboard Chemical Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingboard Chemical and ReTo Eco 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 ReTo Eco Solutions are associated (or correlated) with Kingboard Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingboard Chemical has no effect on the direction of ReTo Eco i.e., ReTo Eco and Kingboard Chemical go up and down completely randomly.

Pair Corralation between ReTo Eco and Kingboard Chemical

If you would invest  910.00  in ReTo Eco Solutions on December 21, 2024 and sell it today you would lose (410.00) from holding ReTo Eco Solutions or give up 45.05% of portfolio value over 90 days.

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

ReTo Eco Solutions  vs.  Kingboard Chemical Holdings

ReTo Eco Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, ReTo Eco is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Kingboard Chemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingboard Chemical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Kingboard Chemical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ReTo Eco and Kingboard Chemical

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

The idea behind ReTo Eco Solutions and Kingboard Chemical Holdings 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.