Correlation Between Kwong Fong and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both Kwong Fong and Nankang Rubber 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 Nankang Rubber 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 Nankang Rubber Tire, you can compare the effects of market volatilities on Kwong Fong and Nankang Rubber 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 Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kwong Fong and Nankang Rubber.
Diversification Opportunities for Kwong Fong and Nankang Rubber
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kwong and Nankang is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire 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 Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Kwong Fong i.e., Kwong Fong and Nankang Rubber go up and down completely randomly.
Pair Corralation between Kwong Fong and Nankang Rubber
Assuming the 90 days trading horizon Kwong Fong Industries is expected to under-perform the Nankang Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Kwong Fong Industries is 1.09 times less risky than Nankang Rubber. The stock trades about -0.05 of its potential returns per unit of risk. The Nankang Rubber Tire is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,800 in Nankang Rubber Tire on August 24, 2024 and sell it today you would earn a total of 35.00 from holding Nankang Rubber Tire or generate 0.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kwong Fong Industries vs. Nankang Rubber Tire
Performance |
| Timeline |
| Kwong Fong Industries |
| Nankang Rubber Tire |
Kwong Fong and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kwong Fong and Nankang Rubber
The main advantage of trading using opposite Kwong Fong and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kwong Fong position performs unexpectedly, Nankang Rubber 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 Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.| Kwong Fong vs. Great China Metal | Kwong Fong vs. Tai Tung Communication | Kwong Fong vs. Cleanaway Co | Kwong Fong vs. U Media Communications |
| Nankang Rubber vs. Taiwan Semiconductor Manufacturing | Nankang Rubber vs. Hon Hai Precision | Nankang Rubber vs. MediaTek | Nankang Rubber vs. Chunghwa Telecom Co |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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