Correlation Between Stellar and Guangzhou KDT

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

By analyzing existing cross correlation between Stellar and Guangzhou KDT Machinery, you can compare the effects of market volatilities on Stellar and Guangzhou KDT 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 Stellar with a short position of Guangzhou KDT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Guangzhou KDT.

Diversification Opportunities for Stellar and Guangzhou KDT

0.39

Correlation Coefficient

Stellar  Guangzhou KDT

Weak diversification

The 3 months correlation between Stellar and Guangzhou is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Guangzhou KDT Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KDT Machinery and Stellar 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 Stellar are associated (or correlated) with Guangzhou KDT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KDT Machinery has no effect on the direction of Stellar i.e., Stellar and Guangzhou KDT go up and down completely randomly.

Pair Corralation between Stellar and Guangzhou KDT

Assuming the 90 days trading horizon Stellar is expected to generate 3.39 times more return on investment than Guangzhou KDT. However, Stellar is 3.39 times more volatile than Guangzhou KDT Machinery. It trades about 0.13 of its potential returns per unit of risk. Guangzhou KDT Machinery is currently generating about -0.04 per unit of risk. If you would invest  11.00  in Stellar on October 12, 2024 and sell it today you would earn a total of  28.00  from holding Stellar or generate 254.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.21%
Values	Daily Returns

Stellar  vs.  Guangzhou KDT Machinery

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou KDT Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guangzhou KDT Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou KDT is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stellar and Guangzhou KDT

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

The idea behind Stellar and Guangzhou KDT Machinery 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.