Correlation Between Analog Devices and Guangzhou

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

By analyzing existing cross correlation between Analog Devices and Guangzhou RF Properties, you can compare the effects of market volatilities on Analog Devices and Guangzhou 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 Analog Devices with a short position of Guangzhou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Guangzhou.

Diversification Opportunities for Analog Devices and Guangzhou

-0.62

Correlation Coefficient

Analog Devices  Guangzhou

Excellent diversification

The 3 months correlation between Analog and Guangzhou is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Guangzhou RF Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou RF Properties and Analog Devices 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 Analog Devices are associated (or correlated) with Guangzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou RF Properties has no effect on the direction of Analog Devices i.e., Analog Devices and Guangzhou go up and down completely randomly.

Pair Corralation between Analog Devices and Guangzhou

Considering the 90-day investment horizon Analog Devices is expected to under-perform the Guangzhou. But the stock apears to be less risky and, when comparing its historical volatility, Analog Devices is 8.9 times less risky than Guangzhou. The stock trades about -0.07 of its potential returns per unit of risk. The Guangzhou RF Properties is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Guangzhou RF Properties on September 20, 2024 and sell it today you would earn a total of  12.00  from holding Guangzhou RF Properties or generate 109.09% return on investment over 90 days.

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

Analog Devices  vs.  Guangzhou RF Properties

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Guangzhou RF Properties

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou RF Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Guangzhou reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Guangzhou

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

The idea behind Analog Devices and Guangzhou RF Properties 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.