Correlation Between Kuang Chi and Huafa Industrial

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Can any of the company-specific risk be diversified away by investing in both Kuang Chi and Huafa Industrial 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 Kuang Chi and Huafa Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kuang Chi Technologies and Huafa Industrial Co, you can compare the effects of market volatilities on Kuang Chi and Huafa Industrial 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 Kuang Chi with a short position of Huafa Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuang Chi and Huafa Industrial.

Diversification Opportunities for Kuang Chi and Huafa Industrial

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Kuang and Huafa is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Huafa Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huafa Industrial and Kuang Chi 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 Kuang Chi Technologies are associated (or correlated) with Huafa Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huafa Industrial has no effect on the direction of Kuang Chi i.e., Kuang Chi and Huafa Industrial go up and down completely randomly.

Pair Corralation between Kuang Chi and Huafa Industrial

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to generate 1.27 times more return on investment than Huafa Industrial. However, Kuang Chi is 1.27 times more volatile than Huafa Industrial Co. It trades about 0.08 of its potential returns per unit of risk. Huafa Industrial Co is currently generating about -0.05 per unit of risk. If you would invest  1,694  in Kuang Chi Technologies on November 27, 2024 and sell it today you would earn a total of  2,688  from holding Kuang Chi Technologies or generate 158.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kuang Chi Technologies  vs.  Huafa Industrial Co

 Performance 
       Timeline  
Kuang Chi Technologies 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuang Chi sustained solid returns over the last few months and may actually be approaching a breakup point.
Huafa Industrial 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Huafa Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kuang Chi and Huafa Industrial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kuang Chi and Huafa Industrial

The main advantage of trading using opposite Kuang Chi and Huafa Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuang Chi position performs unexpectedly, Huafa Industrial 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 Huafa Industrial will offset losses from the drop in Huafa Industrial's long position.
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The idea behind Kuang Chi Technologies and Huafa Industrial Co 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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