Correlation Between China Development and Kee Tai
Can any of the company-specific risk be diversified away by investing in both China Development and Kee Tai 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 China Development and Kee Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Development Financial and Kee Tai Properties, you can compare the effects of market volatilities on China Development and Kee Tai 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 China Development with a short position of Kee Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Kee Tai.
Diversification Opportunities for China Development and Kee Tai
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between China and Kee is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Kee Tai Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kee Tai Properties and China Development 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 China Development Financial are associated (or correlated) with Kee Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kee Tai Properties has no effect on the direction of China Development i.e., China Development and Kee Tai go up and down completely randomly.
Pair Corralation between China Development and Kee Tai
Assuming the 90 days trading horizon China Development Financial is expected to generate 0.72 times more return on investment than Kee Tai. However, China Development Financial is 1.4 times less risky than Kee Tai. It trades about 0.29 of its potential returns per unit of risk. Kee Tai Properties is currently generating about -0.23 per unit of risk. If you would invest 1,715 in China Development Financial on September 19, 2024 and sell it today you would earn a total of 90.00 from holding China Development Financial or generate 5.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Kee Tai Properties
Performance |
| Timeline |
| China Development |
| Kee Tai Properties |
China Development and Kee Tai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Kee Tai
The main advantage of trading using opposite China Development and Kee Tai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Kee Tai 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 Kee Tai will offset losses from the drop in Kee Tai's long position.| China Development vs. Central Reinsurance Corp | China Development vs. Huaku Development Co | China Development vs. Fubon Financial Holding | China Development vs. Chailease Holding Co |
| Kee Tai vs. Hung Sheng Construction | Kee Tai vs. Chainqui Construction Development | Kee Tai vs. BES Engineering Co | Kee Tai vs. Long Bon International |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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