Correlation Between Kao Fong and Jetwell Computer
Can any of the company-specific risk be diversified away by investing in both Kao Fong and Jetwell Computer 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 Kao Fong and Jetwell Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kao Fong Machinery and Jetwell Computer Co, you can compare the effects of market volatilities on Kao Fong and Jetwell Computer 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 Kao Fong with a short position of Jetwell Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao Fong and Jetwell Computer.
Diversification Opportunities for Kao Fong and Jetwell Computer
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Kao and Jetwell is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Jetwell Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jetwell Computer and Kao Fong 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 Kao Fong Machinery are associated (or correlated) with Jetwell Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jetwell Computer has no effect on the direction of Kao Fong i.e., Kao Fong and Jetwell Computer go up and down completely randomly.
Pair Corralation between Kao Fong and Jetwell Computer
Assuming the 90 days trading horizon Kao Fong Machinery is expected to under-perform the Jetwell Computer. But the stock apears to be less risky and, when comparing its historical volatility, Kao Fong Machinery is 1.34 times less risky than Jetwell Computer. The stock trades about -0.38 of its potential returns per unit of risk. The Jetwell Computer Co is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 17,400 in Jetwell Computer Co on November 4, 2024 and sell it today you would lose (1,450) from holding Jetwell Computer Co or give up 8.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kao Fong Machinery vs. Jetwell Computer Co
Performance |
| Timeline |
| Kao Fong Machinery |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| Jetwell Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Kao Fong and Jetwell Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kao Fong and Jetwell Computer
The main advantage of trading using opposite Kao Fong and Jetwell Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kao Fong position performs unexpectedly, Jetwell Computer 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 Jetwell Computer will offset losses from the drop in Jetwell Computer's long position.The idea behind Kao Fong Machinery and Jetwell Computer 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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