Correlation Between China Development and Kings Town
Can any of the company-specific risk be diversified away by investing in both China Development and Kings Town 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 Kings Town 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 Kings Town Bank, you can compare the effects of market volatilities on China Development and Kings Town 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 Kings Town. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Development and Kings Town.
Diversification Opportunities for China Development and Kings Town
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Kings is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Development Financial and Kings Town Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kings Town Bank 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 Kings Town. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kings Town Bank has no effect on the direction of China Development i.e., China Development and Kings Town go up and down completely randomly.
Pair Corralation between China Development and Kings Town
Assuming the 90 days trading horizon China Development Financial is expected to generate 0.67 times more return on investment than Kings Town. However, China Development Financial is 1.5 times less risky than Kings Town. It trades about 0.12 of its potential returns per unit of risk. Kings Town Bank is currently generating about -0.05 per unit of risk. If you would invest 1,675 in China Development Financial on September 1, 2024 and sell it today you would earn a total of 45.00 from holding China Development Financial or generate 2.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Development Financial vs. Kings Town Bank
Performance |
| Timeline |
| China Development |
| Kings Town Bank |
China Development and Kings Town Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Development and Kings Town
The main advantage of trading using opposite China Development and Kings Town positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Development position performs unexpectedly, Kings Town 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 Kings Town will offset losses from the drop in Kings Town's long position.| China Development vs. Central Reinsurance Corp | China Development vs. Huaku Development Co | China Development vs. Fubon Financial Holding | China Development vs. CTBC Financial Holding |
| Kings Town vs. Taichung Commercial Bank | Kings Town vs. Far Eastern International | Kings Town vs. Taiwan Business Bank | Kings Town vs. Sinopac Financial Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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