Correlation Between RITES and Kingfa Science

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

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

Diversification Opportunities for RITES and Kingfa Science

0.81

Correlation Coefficient

RITES  Kingfa Science

Very poor diversification

The 3 months correlation between RITES and Kingfa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding RITES 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 RITES 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 RITES 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 RITES i.e., RITES and Kingfa Science go up and down completely randomly.

Pair Corralation between RITES and Kingfa Science

Assuming the 90 days trading horizon RITES Limited is expected to generate 1.03 times more return on investment than Kingfa Science. However, RITES is 1.03 times more volatile than Kingfa Science Technology. It trades about -0.06 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about -0.11 per unit of risk. If you would invest  27,864  in RITES Limited on December 23, 2024 and sell it today you would lose (3,912) from holding RITES Limited or give up 14.04% of portfolio value over 90 days.

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

RITES Limited  vs.  Kingfa Science Technology

RITES Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days RITES Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Kingfa Science Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kingfa Science Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RITES and Kingfa Science

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

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.