Correlation Between Kings Town and Chong Hong
Can any of the company-specific risk be diversified away by investing in both Kings Town and Chong Hong 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 Kings Town and Chong Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kings Town Construction and Chong Hong Construction, you can compare the effects of market volatilities on Kings Town and Chong Hong 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 Kings Town with a short position of Chong Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kings Town and Chong Hong.
Diversification Opportunities for Kings Town and Chong Hong
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Kings and Chong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Kings Town Construction and Chong Hong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chong Hong Construction and Kings Town 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 Kings Town Construction are associated (or correlated) with Chong Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chong Hong Construction has no effect on the direction of Kings Town i.e., Kings Town and Chong Hong go up and down completely randomly.
Pair Corralation between Kings Town and Chong Hong
Assuming the 90 days trading horizon Kings Town Construction is expected to generate 1.6 times more return on investment than Chong Hong. However, Kings Town is 1.6 times more volatile than Chong Hong Construction. It trades about 0.11 of its potential returns per unit of risk. Chong Hong Construction is currently generating about 0.04 per unit of risk. If you would invest 3,175 in Kings Town Construction on August 27, 2024 and sell it today you would earn a total of 4,835 from holding Kings Town Construction or generate 152.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kings Town Construction vs. Chong Hong Construction
Performance |
| Timeline |
| Kings Town Construction |
| Chong Hong Construction |
Kings Town and Chong Hong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kings Town and Chong Hong
The main advantage of trading using opposite Kings Town and Chong Hong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kings Town position performs unexpectedly, Chong Hong 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 Chong Hong will offset losses from the drop in Chong Hong's long position.| Kings Town vs. Kindom Construction Corp | Kings Town vs. Highwealth Construction Corp | Kings Town vs. Hung Sheng Construction | Kings Town vs. Huaku Development Co |
| Chong Hong vs. Huaku Development Co | Chong Hong vs. Farglory Land Development | Chong Hong vs. Highwealth Construction Corp | Chong Hong vs. Ruentex Development 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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