Correlation Between Kenda Rubber and Tong Yang

Can any of the company-specific risk be diversified away by investing in both Kenda Rubber and Tong Yang 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 Kenda Rubber and Tong Yang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kenda Rubber Industrial and Tong Yang Industry, you can compare the effects of market volatilities on Kenda Rubber and Tong Yang 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 Kenda Rubber with a short position of Tong Yang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenda Rubber and Tong Yang.

Diversification Opportunities for Kenda Rubber and Tong Yang

0.84

Correlation Coefficient

Kenda Rubber  Tong Yang

Very poor diversification

The 3 months correlation between Kenda and Tong is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kenda Rubber Industrial and Tong Yang Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Yang Industry and Kenda Rubber 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 Kenda Rubber Industrial are associated (or correlated) with Tong Yang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Yang Industry has no effect on the direction of Kenda Rubber i.e., Kenda Rubber and Tong Yang go up and down completely randomly.

Pair Corralation between Kenda Rubber and Tong Yang

Assuming the 90 days trading horizon Kenda Rubber Industrial is expected to generate 0.55 times more return on investment than Tong Yang. However, Kenda Rubber Industrial is 1.83 times less risky than Tong Yang. It trades about 0.14 of its potential returns per unit of risk. Tong Yang Industry is currently generating about -0.05 per unit of risk. If you would invest  3,200  in Kenda Rubber Industrial on February 1, 2024 and sell it today you would earn a total of  125.00  from holding Kenda Rubber Industrial or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Kenda Rubber Industrial  vs.  Tong Yang Industry

Kenda Rubber Industrial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenda Rubber Industrial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kenda Rubber may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Tong Yang Industry

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tong Yang Industry are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tong Yang showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kenda Rubber and Tong Yang

The main advantage of trading using opposite Kenda Rubber and Tong Yang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kenda Rubber position performs unexpectedly, Tong Yang 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 Tong Yang will offset losses from the drop in Tong Yang's long position.

The idea behind Kenda Rubber Industrial and Tong Yang Industry 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.