Correlation Between Great Computer and Prince Housing

Can any of the company-specific risk be diversified away by investing in both Great Computer and Prince Housing 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 Great Computer and Prince Housing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Computer and Prince Housing Development, you can compare the effects of market volatilities on Great Computer and Prince Housing 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 Great Computer with a short position of Prince Housing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Computer and Prince Housing.

Diversification Opportunities for Great Computer and Prince Housing

-0.15

Correlation Coefficient

Great Computer  Prince Housing

Good diversification

The 3 months correlation between Great and Prince is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Great Computer and Prince Housing Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prince Housing Devel and Great Computer 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 Great Computer are associated (or correlated) with Prince Housing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prince Housing Devel has no effect on the direction of Great Computer i.e., Great Computer and Prince Housing go up and down completely randomly.

Pair Corralation between Great Computer and Prince Housing

Assuming the 90 days trading horizon Great Computer is expected to generate 4.89 times more return on investment than Prince Housing. However, Great Computer is 4.89 times more volatile than Prince Housing Development. It trades about 0.12 of its potential returns per unit of risk. Prince Housing Development is currently generating about -0.06 per unit of risk. If you would invest  1,600  in Great Computer on October 4, 2024 and sell it today you would earn a total of  590.00  from holding Great Computer or generate 36.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Great Computer  vs.  Prince Housing Development

Great Computer

Risk-Adjusted Performance

9 of 100

Good

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

Prince Housing Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prince Housing Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Prince Housing 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 Great Computer and Prince Housing

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

The idea behind Great Computer and Prince Housing Development 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.