Correlation Between Rafael Microelectronics and Kao Fong
Can any of the company-specific risk be diversified away by investing in both Rafael Microelectronics and Kao Fong 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 Rafael Microelectronics and Kao Fong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rafael Microelectronics and Kao Fong Machinery, you can compare the effects of market volatilities on Rafael Microelectronics and Kao Fong 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 Rafael Microelectronics with a short position of Kao Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rafael Microelectronics and Kao Fong.
Diversification Opportunities for Rafael Microelectronics and Kao Fong
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rafael and Kao is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Rafael Microelectronics and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery and Rafael Microelectronics 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 Rafael Microelectronics are associated (or correlated) with Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Rafael Microelectronics i.e., Rafael Microelectronics and Kao Fong go up and down completely randomly.
Pair Corralation between Rafael Microelectronics and Kao Fong
Assuming the 90 days trading horizon Rafael Microelectronics is expected to generate 1.28 times more return on investment than Kao Fong. However, Rafael Microelectronics is 1.28 times more volatile than Kao Fong Machinery. It trades about 0.39 of its potential returns per unit of risk. Kao Fong Machinery is currently generating about -0.24 per unit of risk. If you would invest 12,000 in Rafael Microelectronics on October 30, 2024 and sell it today you would earn a total of 3,400 from holding Rafael Microelectronics or generate 28.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rafael Microelectronics vs. Kao Fong Machinery
Performance |
| Timeline |
| Rafael Microelectronics |
| Kao Fong Machinery |
Rafael Microelectronics and Kao Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rafael Microelectronics and Kao Fong
The main advantage of trading using opposite Rafael Microelectronics and Kao Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rafael Microelectronics position performs unexpectedly, Kao Fong 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 Kao Fong will offset losses from the drop in Kao Fong's long position.The idea behind Rafael Microelectronics and Kao Fong Machinery 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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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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