Correlation Between Guangdong Investment and Artesian Resources

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

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

Diversification Opportunities for Guangdong Investment and Artesian Resources

-0.78

Correlation Coefficient

Guangdong Investment  Artesian Resources

Pay attention - limited upside

The 3 months correlation between Guangdong and Artesian is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Artesian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artesian Resources and Guangdong Investment 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 Guangdong Investment Limited are associated (or correlated) with Artesian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artesian Resources has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Artesian Resources go up and down completely randomly.

Pair Corralation between Guangdong Investment and Artesian Resources

Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the Artesian Resources. In addition to that, Guangdong Investment is 1.24 times more volatile than Artesian Resources. It trades about -0.08 of its total potential returns per unit of risk. Artesian Resources is currently generating about -0.01 per unit of volatility. If you would invest  3,354  in Artesian Resources on December 10, 2024 and sell it today you would lose (53.00) from holding Artesian Resources or give up 1.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Guangdong Investment Limited  vs.  Artesian Resources

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Artesian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artesian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Artesian Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Investment and Artesian Resources

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

The idea behind Guangdong Investment Limited and Artesian Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.