Correlation Between China Health and Kingsmen Creatives
Can any of the company-specific risk be diversified away by investing in both China Health and Kingsmen Creatives 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 China Health and Kingsmen Creatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Health Industries and Kingsmen Creatives, you can compare the effects of market volatilities on China Health and Kingsmen Creatives 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 China Health with a short position of Kingsmen Creatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Health and Kingsmen Creatives.
Diversification Opportunities for China Health and Kingsmen Creatives
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Kingsmen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Health Industries and Kingsmen Creatives in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingsmen Creatives and China Health 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 China Health Industries are associated (or correlated) with Kingsmen Creatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingsmen Creatives has no effect on the direction of China Health i.e., China Health and Kingsmen Creatives go up and down completely randomly.
Pair Corralation between China Health and Kingsmen Creatives
Given the investment horizon of 90 days China Health Industries is expected to generate 9.39 times more return on investment than Kingsmen Creatives. However, China Health is 9.39 times more volatile than Kingsmen Creatives. It trades about 0.06 of its potential returns per unit of risk. Kingsmen Creatives is currently generating about 0.03 per unit of risk. If you would invest 17.00 in China Health Industries on September 20, 2024 and sell it today you would earn a total of 11.00 from holding China Health Industries or generate 64.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 63.64% |
| Values | Daily Returns |
China Health Industries vs. Kingsmen Creatives
Performance |
| Timeline |
| China Health Industries |
| Kingsmen Creatives |
China Health and Kingsmen Creatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Health and Kingsmen Creatives
The main advantage of trading using opposite China Health and Kingsmen Creatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Health position performs unexpectedly, Kingsmen Creatives 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 Kingsmen Creatives will offset losses from the drop in Kingsmen Creatives' long position.| China Health vs. BCE Inc | ||
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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