Correlation Between RS Public and Kang Yong

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

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

Diversification Opportunities for RS Public and Kang Yong

0.83

Correlation Coefficient

RS Public  Kang Yong

Very poor diversification

The 3 months correlation between RS Public and Kang is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding RS Public and Kang Yong Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kang Yong Electric and RS Public 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 RS Public are associated (or correlated) with Kang Yong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kang Yong Electric has no effect on the direction of RS Public i.e., RS Public and Kang Yong go up and down completely randomly.

Pair Corralation between RS Public and Kang Yong

Assuming the 90 days horizon RS Public is expected to generate 1.04 times less return on investment than Kang Yong. But when comparing it to its historical volatility, RS Public is 1.0 times less risky than Kang Yong. It trades about 0.04 of its potential returns per unit of risk. Kang Yong Electric is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  29,642  in Kang Yong Electric on October 4, 2024 and sell it today you would lose (842.00) from holding Kang Yong Electric or give up 2.84% of portfolio value over 90 days.

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

RS Public  vs.  Kang Yong Electric

RS Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, RS Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kang Yong Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kang Yong Electric has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with RS Public and Kang Yong

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

The idea behind RS Public and Kang Yong Electric 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.