Correlation Between Kunyue Development and Nankang Rubber
Can any of the company-specific risk be diversified away by investing in both Kunyue Development and Nankang Rubber 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 Kunyue Development and Nankang Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kunyue Development Co and Nankang Rubber Tire, you can compare the effects of market volatilities on Kunyue Development and Nankang Rubber 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 Kunyue Development with a short position of Nankang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kunyue Development and Nankang Rubber.
Diversification Opportunities for Kunyue Development and Nankang Rubber
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kunyue and Nankang is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kunyue Development Co and Nankang Rubber Tire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nankang Rubber Tire and Kunyue 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 Kunyue Development Co are associated (or correlated) with Nankang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nankang Rubber Tire has no effect on the direction of Kunyue Development i.e., Kunyue Development and Nankang Rubber go up and down completely randomly.
Pair Corralation between Kunyue Development and Nankang Rubber
Assuming the 90 days trading horizon Kunyue Development Co is expected to generate 1.16 times more return on investment than Nankang Rubber. However, Kunyue Development is 1.16 times more volatile than Nankang Rubber Tire. It trades about 0.09 of its potential returns per unit of risk. Nankang Rubber Tire is currently generating about 0.05 per unit of risk. If you would invest 2,451 in Kunyue Development Co on August 24, 2024 and sell it today you would earn a total of 1,579 from holding Kunyue Development Co or generate 64.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kunyue Development Co vs. Nankang Rubber Tire
Performance |
| Timeline |
| Kunyue Development |
| Nankang Rubber Tire |
Kunyue Development and Nankang Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kunyue Development and Nankang Rubber
The main advantage of trading using opposite Kunyue Development and Nankang Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kunyue Development position performs unexpectedly, Nankang Rubber 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 Nankang Rubber will offset losses from the drop in Nankang Rubber's long position.| Kunyue Development vs. Nankang Rubber Tire | Kunyue Development vs. CKM Building Material | Kunyue Development vs. Ibase Gaming | Kunyue Development vs. Advanced Echem Materials |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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