Correlation Between Li Kang and Chicony Power
Can any of the company-specific risk be diversified away by investing in both Li Kang and Chicony Power 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 Li Kang and Chicony Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Kang Biomedical and Chicony Power Technology, you can compare the effects of market volatilities on Li Kang and Chicony Power 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 Li Kang with a short position of Chicony Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Kang and Chicony Power.
Diversification Opportunities for Li Kang and Chicony Power
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between 6242 and Chicony is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Li Kang Biomedical and Chicony Power Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chicony Power Technology and Li Kang 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 Li Kang Biomedical are associated (or correlated) with Chicony Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chicony Power Technology has no effect on the direction of Li Kang i.e., Li Kang and Chicony Power go up and down completely randomly.
Pair Corralation between Li Kang and Chicony Power
Assuming the 90 days trading horizon Li Kang is expected to generate 15.11 times less return on investment than Chicony Power. But when comparing it to its historical volatility, Li Kang Biomedical is 3.12 times less risky than Chicony Power. It trades about 0.04 of its potential returns per unit of risk. Chicony Power Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 12,150 in Chicony Power Technology on November 4, 2024 and sell it today you would earn a total of 450.00 from holding Chicony Power Technology or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Li Kang Biomedical vs. Chicony Power Technology
Performance |
| Timeline |
| Li Kang Biomedical |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Chicony Power Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Li Kang and Chicony Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Li Kang and Chicony Power
The main advantage of trading using opposite Li Kang and Chicony Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Kang position performs unexpectedly, Chicony Power 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 Chicony Power will offset losses from the drop in Chicony Power's long position.The idea behind Li Kang Biomedical and Chicony Power Technology 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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