Correlation Between Kao Fong and CVC Technologies

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Can any of the company-specific risk be diversified away by investing in both Kao Fong and CVC Technologies 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 CVC Technologies 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 CVC Technologies, you can compare the effects of market volatilities on Kao Fong and CVC Technologies 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 CVC Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao Fong and CVC Technologies.

Diversification Opportunities for Kao Fong and CVC Technologies

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between Kao and CVC is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and CVC Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Technologies 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 CVC Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Technologies has no effect on the direction of Kao Fong i.e., Kao Fong and CVC Technologies go up and down completely randomly.

Pair Corralation between Kao Fong and CVC Technologies

Assuming the 90 days trading horizon Kao Fong Machinery is expected to under-perform the CVC Technologies. In addition to that, Kao Fong is 1.62 times more volatile than CVC Technologies. It trades about -0.24 of its total potential returns per unit of risk. CVC Technologies is currently generating about -0.01 per unit of volatility. If you would invest  2,195  in CVC Technologies on October 29, 2024 and sell it today you would lose (10.00) from holding CVC Technologies or give up 0.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Kao Fong Machinery  vs.  CVC Technologies

 Performance 
       Timeline  
Kao Fong Machinery 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days Kao Fong Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kao Fong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
CVC Technologies 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CVC Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CVC Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kao Fong and CVC Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kao Fong and CVC Technologies

The main advantage of trading using opposite Kao Fong and CVC Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kao Fong position performs unexpectedly, CVC Technologies 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 CVC Technologies will offset losses from the drop in CVC Technologies' long position.
The idea behind Kao Fong Machinery and CVC Technologies 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.
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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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