Correlation Between Kingdee International and Beta Systems
Can any of the company-specific risk be diversified away by investing in both Kingdee International and Beta Systems 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 Kingdee International and Beta Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kingdee International Software and Beta Systems Software, you can compare the effects of market volatilities on Kingdee International and Beta Systems 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 Kingdee International with a short position of Beta Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and Beta Systems.
Diversification Opportunities for Kingdee International and Beta Systems
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kingdee and Beta is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Beta Systems Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beta Systems Software and Kingdee International 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 Kingdee International Software are associated (or correlated) with Beta Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beta Systems Software has no effect on the direction of Kingdee International i.e., Kingdee International and Beta Systems go up and down completely randomly.
Pair Corralation between Kingdee International and Beta Systems
Assuming the 90 days trading horizon Kingdee International Software is expected to generate 4.05 times more return on investment than Beta Systems. However, Kingdee International is 4.05 times more volatile than Beta Systems Software. It trades about 0.45 of its potential returns per unit of risk. Beta Systems Software is currently generating about -0.16 per unit of risk. If you would invest 97.00 in Kingdee International Software on November 5, 2024 and sell it today you would earn a total of 28.00 from holding Kingdee International Software or generate 28.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kingdee International Software vs. Beta Systems Software
Performance |
| Timeline |
| Kingdee International |
| Beta Systems Software |
Kingdee International and Beta Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kingdee International and Beta Systems
The main advantage of trading using opposite Kingdee International and Beta Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingdee International position performs unexpectedly, Beta Systems 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 Beta Systems will offset losses from the drop in Beta Systems' long position.| Kingdee International vs. ON SEMICONDUCTOR | Kingdee International vs. ELMOS SEMICONDUCTOR | Kingdee International vs. Singapore Reinsurance | Kingdee International vs. Insurance Australia Group |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Beta Systems as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Beta Systems' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Beta Systems' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Beta Systems Software.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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