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

-0.17

Correlation Coefficient

Guangdong Investment  Artesian Resources

Good diversification

The 3 months correlation between Guangdong and Artesian is -0.17. 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 generate 3.14 times more return on investment than Artesian Resources. However, Guangdong Investment is 3.14 times more volatile than Artesian Resources. It trades about 0.12 of its potential returns per unit of risk. Artesian Resources is currently generating about -0.11 per unit of risk. If you would invest  61.00  in Guangdong Investment Limited on September 19, 2024 and sell it today you would earn a total of  22.00  from holding Guangdong Investment Limited or generate 36.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Guangdong Investment Limited  vs.  Artesian Resources

Guangdong Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Artesian Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artesian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.