Correlation Between East Africa and Guangdong Investment

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

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

Diversification Opportunities for East Africa and Guangdong Investment

0.0

Correlation Coefficient

East Africa  Guangdong Investment

Pay attention - limited upside

The 3 months correlation between East and Guangdong is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and Guangdong Investment go up and down completely randomly.

Pair Corralation between East Africa and Guangdong Investment

If you would invest  78.00  in Guangdong Investment Limited on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Guangdong Investment Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.63%
Values	Daily Returns

East Africa Metals  vs.  Guangdong Investment Limited

East Africa Metals

Risk-Adjusted Performance

Very Weak

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

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 East Africa and Guangdong Investment

The main advantage of trading using opposite East Africa and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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 East Africa Metals 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.