Correlation Between China Everbright and Guardian Capital

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

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

Diversification Opportunities for China Everbright and Guardian Capital

0.16

Correlation Coefficient

China Everbright  Guardian Capital

Average diversification

The 3 months correlation between China and Guardian is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding China Everbright Ltd and Guardian Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardian Capital and China Everbright 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 China Everbright Ltd are associated (or correlated) with Guardian Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardian Capital has no effect on the direction of China Everbright i.e., China Everbright and Guardian Capital go up and down completely randomly.

Pair Corralation between China Everbright and Guardian Capital

Assuming the 90 days horizon China Everbright Ltd is expected to generate 4.63 times more return on investment than Guardian Capital. However, China Everbright is 4.63 times more volatile than Guardian Capital Group. It trades about 0.22 of its potential returns per unit of risk. Guardian Capital Group is currently generating about 0.02 per unit of risk. If you would invest  418.00  in China Everbright Ltd on October 12, 2024 and sell it today you would earn a total of  215.00  from holding China Everbright Ltd or generate 51.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

China Everbright Ltd  vs.  Guardian Capital Group

China Everbright

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Everbright Ltd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, China Everbright showed solid returns over the last few months and may actually be approaching a breakup point.

Guardian Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Capital Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guardian Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Everbright and Guardian Capital

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

The idea behind China Everbright Ltd and Guardian Capital Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.