Correlation Between Kwong Fong and Solar Applied
Can any of the company-specific risk be diversified away by investing in both Kwong Fong and Solar Applied 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 Kwong Fong and Solar Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kwong Fong Industries and Solar Applied Materials, you can compare the effects of market volatilities on Kwong Fong and Solar Applied 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 Kwong Fong with a short position of Solar Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kwong Fong and Solar Applied.
Diversification Opportunities for Kwong Fong and Solar Applied
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kwong and Solar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Solar Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Applied Materials and Kwong Fong 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 Kwong Fong Industries are associated (or correlated) with Solar Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Applied Materials has no effect on the direction of Kwong Fong i.e., Kwong Fong and Solar Applied go up and down completely randomly.
Pair Corralation between Kwong Fong and Solar Applied
Assuming the 90 days trading horizon Kwong Fong is expected to generate 4.09 times less return on investment than Solar Applied. But when comparing it to its historical volatility, Kwong Fong Industries is 1.47 times less risky than Solar Applied. It trades about 0.02 of its potential returns per unit of risk. Solar Applied Materials is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,215 in Solar Applied Materials on December 11, 2024 and sell it today you would earn a total of 1,935 from holding Solar Applied Materials or generate 45.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kwong Fong Industries vs. Solar Applied Materials
Performance |
| Timeline |
| Kwong Fong Industries |
| Solar Applied Materials |
Kwong Fong and Solar Applied Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kwong Fong and Solar Applied
The main advantage of trading using opposite Kwong Fong and Solar Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kwong Fong position performs unexpectedly, Solar Applied 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 Solar Applied will offset losses from the drop in Solar Applied's long position.| Kwong Fong vs. Taiwan Speciality Chemicals | ||
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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