Correlation Between De Licacy and Goldsun Building

Can any of the company-specific risk be diversified away by investing in both De Licacy and Goldsun Building 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 De Licacy and Goldsun Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between De Licacy Industrial and Goldsun Building Materials, you can compare the effects of market volatilities on De Licacy and Goldsun Building 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 De Licacy with a short position of Goldsun Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Licacy and Goldsun Building.

Diversification Opportunities for De Licacy and Goldsun Building

0.34

Correlation Coefficient

De Licacy  Goldsun Building

Weak diversification

The 3 months correlation between 1464 and Goldsun is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and Goldsun Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldsun Building Mat and De Licacy 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 De Licacy Industrial are associated (or correlated) with Goldsun Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldsun Building Mat has no effect on the direction of De Licacy i.e., De Licacy and Goldsun Building go up and down completely randomly.

Pair Corralation between De Licacy and Goldsun Building

Assuming the 90 days trading horizon De Licacy Industrial is expected to generate 1.72 times more return on investment than Goldsun Building. However, De Licacy is 1.72 times more volatile than Goldsun Building Materials. It trades about 0.14 of its potential returns per unit of risk. Goldsun Building Materials is currently generating about -0.23 per unit of risk. If you would invest  1,545  in De Licacy Industrial on September 22, 2024 and sell it today you would earn a total of  130.00  from holding De Licacy Industrial or generate 8.41% return on investment over 90 days.

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

De Licacy Industrial  vs.  Goldsun Building Materials

De Licacy Industrial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

Goldsun Building Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldsun Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Goldsun Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with De Licacy and Goldsun Building

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

The idea behind De Licacy Industrial and Goldsun Building Materials 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.