Correlation Between Kaimei Electronic and Prosperity Dielectrics
Can any of the company-specific risk be diversified away by investing in both Kaimei Electronic and Prosperity Dielectrics 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 Kaimei Electronic and Prosperity Dielectrics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kaimei Electronic Corp and Prosperity Dielectrics Co, you can compare the effects of market volatilities on Kaimei Electronic and Prosperity Dielectrics 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 Kaimei Electronic with a short position of Prosperity Dielectrics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kaimei Electronic and Prosperity Dielectrics.
Diversification Opportunities for Kaimei Electronic and Prosperity Dielectrics
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kaimei and Prosperity is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kaimei Electronic Corp and Prosperity Dielectrics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Dielectrics and Kaimei Electronic 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 Kaimei Electronic Corp are associated (or correlated) with Prosperity Dielectrics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Dielectrics has no effect on the direction of Kaimei Electronic i.e., Kaimei Electronic and Prosperity Dielectrics go up and down completely randomly.
Pair Corralation between Kaimei Electronic and Prosperity Dielectrics
Assuming the 90 days trading horizon Kaimei Electronic Corp is expected to generate 1.63 times more return on investment than Prosperity Dielectrics. However, Kaimei Electronic is 1.63 times more volatile than Prosperity Dielectrics Co. It trades about 0.15 of its potential returns per unit of risk. Prosperity Dielectrics Co is currently generating about -0.1 per unit of risk. If you would invest 6,390 in Kaimei Electronic Corp on September 2, 2024 and sell it today you would earn a total of 440.00 from holding Kaimei Electronic Corp or generate 6.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kaimei Electronic Corp vs. Prosperity Dielectrics Co
Performance |
| Timeline |
| Kaimei Electronic Corp |
| Prosperity Dielectrics |
Kaimei Electronic and Prosperity Dielectrics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kaimei Electronic and Prosperity Dielectrics
The main advantage of trading using opposite Kaimei Electronic and Prosperity Dielectrics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kaimei Electronic position performs unexpectedly, Prosperity Dielectrics 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 Prosperity Dielectrics will offset losses from the drop in Prosperity Dielectrics' long position.The idea behind Kaimei Electronic Corp and Prosperity Dielectrics 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.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |