Correlation Between Kingfa Science and Automotive Axles

Can any of the company-specific risk be diversified away by investing in both Kingfa Science and Automotive Axles 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 Automotive Axles 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 Automotive Axles Limited, you can compare the effects of market volatilities on Kingfa Science and Automotive Axles 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 Automotive Axles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingfa Science and Automotive Axles.

Diversification Opportunities for Kingfa Science and Automotive Axles

0.55

Correlation Coefficient

Kingfa Science  Automotive Axles

Very weak diversification

The 3 months correlation between Kingfa and Automotive is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kingfa Science Technology and Automotive Axles Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automotive Axles 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 Automotive Axles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automotive Axles has no effect on the direction of Kingfa Science i.e., Kingfa Science and Automotive Axles go up and down completely randomly.

Pair Corralation between Kingfa Science and Automotive Axles

Assuming the 90 days trading horizon Kingfa Science Technology is expected to generate 1.95 times more return on investment than Automotive Axles. However, Kingfa Science is 1.95 times more volatile than Automotive Axles Limited. It trades about 0.11 of its potential returns per unit of risk. Automotive Axles Limited is currently generating about 0.2 per unit of risk. If you would invest  295,335  in Kingfa Science Technology on April 5, 2025 and sell it today you would earn a total of  45,215  from holding Kingfa Science Technology or generate 15.31% return on investment over 90 days.

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

Kingfa Science Technology  vs.  Automotive Axles Limited

Kingfa Science Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kingfa Science sustained solid returns over the last few months and may actually be approaching a breakup point.

Automotive Axles

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Axles Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Automotive Axles disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingfa Science and Automotive Axles

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

The idea behind Kingfa Science Technology and Automotive Axles Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.