Correlation Between Great Wall and Kung Long
Can any of the company-specific risk be diversified away by investing in both Great Wall and Kung Long 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 Great Wall and Kung Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Kung Long Batteries, you can compare the effects of market volatilities on Great Wall and Kung Long 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 Great Wall with a short position of Kung Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Kung Long.
Diversification Opportunities for Great Wall and Kung Long
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Kung is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Kung Long Batteries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kung Long Batteries and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Kung Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kung Long Batteries has no effect on the direction of Great Wall i.e., Great Wall and Kung Long go up and down completely randomly.
Pair Corralation between Great Wall and Kung Long
Assuming the 90 days trading horizon Great Wall is expected to generate 1.69 times less return on investment than Kung Long. But when comparing it to its historical volatility, Great Wall Enterprise is 3.06 times less risky than Kung Long. It trades about 0.31 of its potential returns per unit of risk. Kung Long Batteries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 14,800 in Kung Long Batteries on September 1, 2024 and sell it today you would earn a total of 1,000.00 from holding Kung Long Batteries or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Kung Long Batteries
Performance |
| Timeline |
| Great Wall Enterprise |
| Kung Long Batteries |
Great Wall and Kung Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Kung Long
The main advantage of trading using opposite Great Wall and Kung Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Kung Long 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 Kung Long will offset losses from the drop in Kung Long's long position.| Great Wall vs. De Licacy Industrial | Great Wall vs. Wisher Industrial Co | Great Wall vs. Tainan Enterprises Co |
| Kung Long vs. BES Engineering Co | Kung Long vs. Continental Holdings Corp | Kung Long vs. Kee Tai Properties | Kung Long vs. Hung Sheng Construction |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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