Correlation Between Guardian Capital and China Everbright

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

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

Diversification Opportunities for Guardian Capital and China Everbright

0.61

Correlation Coefficient

Guardian Capital  China Everbright

Poor diversification

The 3 months correlation between Guardian and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Guardian Capital Group and China Everbright Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Everbright and Guardian 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 Guardian Capital Group are associated (or correlated) with China Everbright. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Everbright has no effect on the direction of Guardian Capital i.e., Guardian Capital and China Everbright go up and down completely randomly.

Pair Corralation between Guardian Capital and China Everbright

Assuming the 90 days horizon Guardian Capital is expected to generate 1.73 times less return on investment than China Everbright. But when comparing it to its historical volatility, Guardian Capital Group is 1.55 times less risky than China Everbright. It trades about 0.01 of its potential returns per unit of risk. China Everbright Ltd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  694.00  in China Everbright Ltd on October 26, 2024 and sell it today you would lose (50.00) from holding China Everbright Ltd or give up 7.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.42%
Values	Daily Returns

Guardian Capital Group  vs.  China Everbright Ltd

Guardian Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guardian Capital Group are ranked lower than 6 (%) 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.

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 unsteady forward indicators, China Everbright showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardian Capital and China Everbright

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

The idea behind Guardian Capital Group and China Everbright Ltd 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.