Correlation Between Ma Kuang and TWOWAY Communications
Can any of the company-specific risk be diversified away by investing in both Ma Kuang and TWOWAY Communications 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 Ma Kuang and TWOWAY Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ma Kuang Healthcare and TWOWAY Communications, you can compare the effects of market volatilities on Ma Kuang and TWOWAY Communications 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 Ma Kuang with a short position of TWOWAY Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ma Kuang and TWOWAY Communications.
Diversification Opportunities for Ma Kuang and TWOWAY Communications
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between 4139 and TWOWAY is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ma Kuang Healthcare and TWOWAY Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWOWAY Communications and Ma Kuang 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 Ma Kuang Healthcare are associated (or correlated) with TWOWAY Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWOWAY Communications has no effect on the direction of Ma Kuang i.e., Ma Kuang and TWOWAY Communications go up and down completely randomly.
Pair Corralation between Ma Kuang and TWOWAY Communications
Assuming the 90 days trading horizon Ma Kuang is expected to generate 14.83 times less return on investment than TWOWAY Communications. But when comparing it to its historical volatility, Ma Kuang Healthcare is 3.18 times less risky than TWOWAY Communications. It trades about 0.04 of its potential returns per unit of risk. TWOWAY Communications is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 8,550 in TWOWAY Communications on November 3, 2024 and sell it today you would earn a total of 3,150 from holding TWOWAY Communications or generate 36.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ma Kuang Healthcare vs. TWOWAY Communications
Performance |
| Timeline |
| Ma Kuang Healthcare |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| TWOWAY Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Ma Kuang and TWOWAY Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ma Kuang and TWOWAY Communications
The main advantage of trading using opposite Ma Kuang and TWOWAY Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ma Kuang position performs unexpectedly, TWOWAY Communications 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 TWOWAY Communications will offset losses from the drop in TWOWAY Communications' long position.The idea behind Ma Kuang Healthcare and TWOWAY Communications 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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