Correlation Between Kingfa Science and Lemon Tree

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Can any of the company-specific risk be diversified away by investing in both Kingfa Science and Lemon Tree 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 Kingfa Science and Lemon Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kingfa Science Technology and Lemon Tree Hotels, you can compare the effects of market volatilities on Kingfa Science and Lemon Tree 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 Kingfa Science with a short position of Lemon Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingfa Science and Lemon Tree.

Diversification Opportunities for Kingfa Science and Lemon Tree

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Kingfa and Lemon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Lemon Tree Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemon Tree Hotels and Kingfa Science 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 Kingfa Science Technology are associated (or correlated) with Lemon Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemon Tree Hotels has no effect on the direction of Kingfa Science i.e., Kingfa Science and Lemon Tree go up and down completely randomly.

Pair Corralation between Kingfa Science and Lemon Tree

Assuming the 90 days trading horizon Kingfa Science Technology is expected to under-perform the Lemon Tree. In addition to that, Kingfa Science is 1.53 times more volatile than Lemon Tree Hotels. It trades about -0.12 of its total potential returns per unit of risk. Lemon Tree Hotels is currently generating about -0.07 per unit of volatility. If you would invest  15,334  in Lemon Tree Hotels on October 23, 2024 and sell it today you would lose (565.00) from holding Lemon Tree Hotels or give up 3.68% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Kingfa Science Technology  vs.  Lemon Tree Hotels

 Performance 
       Timeline  
Kingfa Science Technology 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Kingfa Science is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Lemon Tree Hotels 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Lemon Tree Hotels are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Lemon Tree reported solid returns over the last few months and may actually be approaching a breakup point.

Kingfa Science and Lemon Tree Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Kingfa Science and Lemon Tree

The main advantage of trading using opposite Kingfa Science and Lemon Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingfa Science position performs unexpectedly, Lemon Tree 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 Lemon Tree will offset losses from the drop in Lemon Tree's long position.
The idea behind Kingfa Science Technology and Lemon Tree Hotels 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.
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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