Correlation Between Trent and Kingfa Science

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

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

Diversification Opportunities for Trent and Kingfa Science

0.21

Correlation Coefficient

Trent  Kingfa Science

Modest diversification

The 3 months correlation between Trent and Kingfa is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Trent 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 Trent 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 Trent 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 Trent i.e., Trent and Kingfa Science go up and down completely randomly.

Pair Corralation between Trent and Kingfa Science

Assuming the 90 days trading horizon Trent is expected to generate 1.33 times less return on investment than Kingfa Science. But when comparing it to its historical volatility, Trent Limited is 1.49 times less risky than Kingfa Science. It trades about 0.09 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  193,040  in Kingfa Science Technology on October 25, 2024 and sell it today you would earn a total of  104,395  from holding Kingfa Science Technology or generate 54.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.51%
Values	Daily Returns

Trent Limited  vs.  Kingfa Science Technology

Trent Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trent Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kingfa Science Technology

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Kingfa Science is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Trent and Kingfa Science

The main advantage of trading using opposite Trent and Kingfa Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trent 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 Trent 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.