Correlation Between Kao Fong and Chien Kuo
Can any of the company-specific risk be diversified away by investing in both Kao Fong and Chien Kuo 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 Chien Kuo 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 Chien Kuo Construction, you can compare the effects of market volatilities on Kao Fong and Chien Kuo 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 Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao Fong and Chien Kuo.
Diversification Opportunities for Kao Fong and Chien Kuo
Very good diversification
The 3 months correlation between Kao and Chien is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction 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 Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Kao Fong i.e., Kao Fong and Chien Kuo go up and down completely randomly.
Pair Corralation between Kao Fong and Chien Kuo
Assuming the 90 days trading horizon Kao Fong is expected to generate 1.19 times less return on investment than Chien Kuo. In addition to that, Kao Fong is 1.32 times more volatile than Chien Kuo Construction. It trades about 0.09 of its total potential returns per unit of risk. Chien Kuo Construction is currently generating about 0.14 per unit of volatility. If you would invest 2,260 in Chien Kuo Construction on August 30, 2024 and sell it today you would earn a total of 440.00 from holding Chien Kuo Construction or generate 19.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kao Fong Machinery vs. Chien Kuo Construction
Performance |
| Timeline |
| Kao Fong Machinery |
| Chien Kuo Construction |
Kao Fong and Chien Kuo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kao Fong and Chien Kuo
The main advantage of trading using opposite Kao Fong and Chien Kuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kao Fong position performs unexpectedly, Chien Kuo 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 Chien Kuo will offset losses from the drop in Chien Kuo's long position.| Kao Fong vs. Yeou Yih Steel | Kao Fong vs. Data International Co | Kao Fong vs. K Way Information | Kao Fong vs. Quanta Storage |
| Chien Kuo vs. Yulon Motor Co | Chien Kuo vs. Far Eastern Department | Chien Kuo vs. China Steel Corp | Chien Kuo vs. Chang Hwa Commercial |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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