Correlation Between DATANG INTL and GuocoLand

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

By analyzing existing cross correlation between DATANG INTL POW and GuocoLand Limited, you can compare the effects of market volatilities on DATANG INTL and GuocoLand 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 DATANG INTL with a short position of GuocoLand. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATANG INTL and GuocoLand.

Diversification Opportunities for DATANG INTL and GuocoLand

-0.4

Correlation Coefficient

DATANG INTL  GuocoLand

Very good diversification

The 3 months correlation between DATANG and GuocoLand is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding DATANG INTL POW and GuocoLand Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GuocoLand Limited and DATANG INTL 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 DATANG INTL POW are associated (or correlated) with GuocoLand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GuocoLand Limited has no effect on the direction of DATANG INTL i.e., DATANG INTL and GuocoLand go up and down completely randomly.

Pair Corralation between DATANG INTL and GuocoLand

Assuming the 90 days trading horizon DATANG INTL POW is expected to generate 9.43 times more return on investment than GuocoLand. However, DATANG INTL is 9.43 times more volatile than GuocoLand Limited. It trades about 0.04 of its potential returns per unit of risk. GuocoLand Limited is currently generating about 0.01 per unit of risk. If you would invest  11.00  in DATANG INTL POW on October 7, 2024 and sell it today you would earn a total of  5.00  from holding DATANG INTL POW or generate 45.45% return on investment over 90 days.

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

DATANG INTL POW  vs.  GuocoLand Limited

DATANG INTL POW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATANG INTL POW has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GuocoLand Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GuocoLand Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, GuocoLand is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with DATANG INTL and GuocoLand

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

The idea behind DATANG INTL POW and GuocoLand 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.