Correlation Between Oceanic Beverages and Li Kang
Can any of the company-specific risk be diversified away by investing in both Oceanic Beverages and Li Kang 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 Oceanic Beverages and Li Kang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Oceanic Beverages Co and Li Kang Biomedical, you can compare the effects of market volatilities on Oceanic Beverages and Li Kang 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 Oceanic Beverages with a short position of Li Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oceanic Beverages and Li Kang.
Diversification Opportunities for Oceanic Beverages and Li Kang
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Oceanic and 6242 is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Oceanic Beverages Co and Li Kang Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Kang Biomedical and Oceanic Beverages 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 Oceanic Beverages Co are associated (or correlated) with Li Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Kang Biomedical has no effect on the direction of Oceanic Beverages i.e., Oceanic Beverages and Li Kang go up and down completely randomly.
Pair Corralation between Oceanic Beverages and Li Kang
Assuming the 90 days trading horizon Oceanic Beverages Co is expected to under-perform the Li Kang. In addition to that, Oceanic Beverages is 2.65 times more volatile than Li Kang Biomedical. It trades about -0.03 of its total potential returns per unit of risk. Li Kang Biomedical is currently generating about -0.02 per unit of volatility. If you would invest 4,250 in Li Kang Biomedical on November 5, 2024 and sell it today you would lose (5.00) from holding Li Kang Biomedical or give up 0.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Oceanic Beverages Co vs. Li Kang Biomedical
Performance |
| Timeline |
| Oceanic Beverages |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Li Kang Biomedical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Oceanic Beverages and Li Kang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Oceanic Beverages and Li Kang
The main advantage of trading using opposite Oceanic Beverages and Li Kang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oceanic Beverages position performs unexpectedly, Li Kang 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 Li Kang will offset losses from the drop in Li Kang's long position.The idea behind Oceanic Beverages Co and Li Kang Biomedical 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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