Correlation Between Steelcast and Kingfa Science

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

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

Diversification Opportunities for Steelcast and Kingfa Science

0.58

Correlation Coefficient

Steelcast  Kingfa Science

Very weak diversification

The 3 months correlation between Steelcast and Kingfa is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Steelcast 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 Steelcast 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 Steelcast 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 Steelcast i.e., Steelcast and Kingfa Science go up and down completely randomly.

Pair Corralation between Steelcast and Kingfa Science

Assuming the 90 days trading horizon Steelcast Limited is expected to under-perform the Kingfa Science. But the stock apears to be less risky and, when comparing its historical volatility, Steelcast Limited is 1.08 times less risky than Kingfa Science. The stock trades about -0.03 of its potential returns per unit of risk. The Kingfa Science Technology is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  329,770  in Kingfa Science Technology on October 8, 2024 and sell it today you would earn a total of  35,580  from holding Kingfa Science Technology or generate 10.79% return on investment over 90 days.

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

Steelcast Limited  vs.  Kingfa Science Technology

Steelcast Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Steelcast Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Steelcast sustained solid returns over the last few months and may actually be approaching a breakup point.

Kingfa Science Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kingfa Science sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steelcast and Kingfa Science

The main advantage of trading using opposite Steelcast and Kingfa Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steelcast 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 Steelcast 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.