Correlation Between KINGBOARD CHEMICAL and China Water
Can any of the company-specific risk be diversified away by investing in both KINGBOARD CHEMICAL and China Water 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 KINGBOARD CHEMICAL and China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KINGBOARD CHEMICAL and China Water Affairs, you can compare the effects of market volatilities on KINGBOARD CHEMICAL and China Water 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 KINGBOARD CHEMICAL with a short position of China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINGBOARD CHEMICAL and China Water.
Diversification Opportunities for KINGBOARD CHEMICAL and China Water
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between KINGBOARD and China is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding KINGBOARD CHEMICAL and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs and KINGBOARD CHEMICAL 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 KINGBOARD CHEMICAL are associated (or correlated) with China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of KINGBOARD CHEMICAL i.e., KINGBOARD CHEMICAL and China Water go up and down completely randomly.
Pair Corralation between KINGBOARD CHEMICAL and China Water
Assuming the 90 days trading horizon KINGBOARD CHEMICAL is expected to generate 1.46 times less return on investment than China Water. But when comparing it to its historical volatility, KINGBOARD CHEMICAL is 1.1 times less risky than China Water. It trades about 0.05 of its potential returns per unit of risk. China Water Affairs is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 24.00 in China Water Affairs on September 12, 2024 and sell it today you would earn a total of 35.00 from holding China Water Affairs or generate 145.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
KINGBOARD CHEMICAL vs. China Water Affairs
Performance |
| Timeline |
| KINGBOARD CHEMICAL |
| China Water Affairs |
KINGBOARD CHEMICAL and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KINGBOARD CHEMICAL and China Water
The main advantage of trading using opposite KINGBOARD CHEMICAL and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINGBOARD CHEMICAL position performs unexpectedly, China Water 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 China Water will offset losses from the drop in China Water's long position.| KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc | KINGBOARD CHEMICAL vs. Apple Inc |
| China Water vs. TSOGO SUN GAMING | China Water vs. GAMESTOP | China Water vs. Sunny Optical Technology | China Water vs. Media and Games |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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