Correlation Between Binah Capital and Guangdong Investment

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

By analyzing existing cross correlation between Binah Capital Group, and Guangdong Investment Limited, you can compare the effects of market volatilities on Binah Capital and Guangdong Investment 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 Binah Capital with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binah Capital and Guangdong Investment.

Diversification Opportunities for Binah Capital and Guangdong Investment

0.57

Correlation Coefficient

Binah Capital  Guangdong Investment

Very weak diversification

The 3 months correlation between Binah and Guangdong is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Binah Capital Group, and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Binah Capital 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 Binah Capital Group, are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Binah Capital i.e., Binah Capital and Guangdong Investment go up and down completely randomly.

Pair Corralation between Binah Capital and Guangdong Investment

Assuming the 90 days horizon Binah Capital Group, is expected to generate 10.97 times more return on investment than Guangdong Investment. However, Binah Capital is 10.97 times more volatile than Guangdong Investment Limited. It trades about 0.1 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.01 per unit of risk. If you would invest  5.00  in Binah Capital Group, on December 20, 2024 and sell it today you would earn a total of  0.13  from holding Binah Capital Group, or generate 2.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	74.14%
Values	Daily Returns

Binah Capital Group,  vs.  Guangdong Investment Limited

Binah Capital Group,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Binah Capital Group, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Binah Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangdong Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Binah Capital and Guangdong Investment

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

The idea behind Binah Capital Group, and Guangdong Investment 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.