Correlation Between Great China and Kwong Fong
Can any of the company-specific risk be diversified away by investing in both Great China and Kwong 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 Great China and Kwong Fong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and Kwong Fong Industries, you can compare the effects of market volatilities on Great China and Kwong 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 Great China with a short position of Kwong Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and Kwong Fong.
Diversification Opportunities for Great China and Kwong Fong
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and Kwong is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and Kwong Fong Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kwong Fong Industries and Great China 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 Great China Metal are associated (or correlated) with Kwong Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kwong Fong Industries has no effect on the direction of Great China i.e., Great China and Kwong Fong go up and down completely randomly.
Pair Corralation between Great China and Kwong Fong
Assuming the 90 days trading horizon Great China is expected to generate 1.12 times less return on investment than Kwong Fong. But when comparing it to its historical volatility, Great China Metal is 2.36 times less risky than Kwong Fong. It trades about 0.62 of its potential returns per unit of risk. Kwong Fong Industries is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,220 in Kwong Fong Industries on November 18, 2024 and sell it today you would earn a total of 50.00 from holding Kwong Fong Industries or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great China Metal vs. Kwong Fong Industries
Performance |
| Timeline |
| Great China Metal |
| Kwong Fong Industries |
Great China and Kwong Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great China and Kwong Fong
The main advantage of trading using opposite Great China and Kwong Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, Kwong 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 Kwong Fong will offset losses from the drop in Kwong Fong's long position.| Great China vs. Taiwan Hon Chuan | Great China vs. Taiwan Secom Co | Great China vs. Taiwan Fu Hsing | Great China vs. Taiwan Shin Kong |
| Kwong Fong vs. Fong Chien Construction | Kwong Fong vs. Dadi Early Childhood Education | Kwong Fong vs. BRIM Biotechnology | Kwong Fong vs. Level Biotechnology |
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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