Correlation Between Guangdong Investment and Bassett Furniture
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Bassett Furniture 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 Bassett Furniture 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 Bassett Furniture Industries, you can compare the effects of market volatilities on Guangdong Investment and Bassett Furniture 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 Bassett Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Bassett Furniture.
Diversification Opportunities for Guangdong Investment and Bassett Furniture
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Guangdong and Bassett is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Bassett Furniture Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bassett Furniture 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 Bassett Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bassett Furniture has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Bassett Furniture go up and down completely randomly.
Pair Corralation between Guangdong Investment and Bassett Furniture
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the Bassett Furniture. In addition to that, Guangdong Investment is 1.08 times more volatile than Bassett Furniture Industries. It trades about -0.08 of its total potential returns per unit of risk. Bassett Furniture Industries is currently generating about 0.05 per unit of volatility. If you would invest 1,509 in Bassett Furniture Industries on December 3, 2024 and sell it today you would earn a total of 71.00 from holding Bassett Furniture Industries or generate 4.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 75.41% |
Values | Daily Returns |
Guangdong Investment Limited vs. Bassett Furniture Industries
Performance |
Timeline |
Guangdong Investment |
Bassett Furniture |
Guangdong Investment and Bassett Furniture Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Guangdong Investment and Bassett Furniture
The main advantage of trading using opposite Guangdong Investment and Bassett Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Bassett Furniture 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 Bassett Furniture will offset losses from the drop in Bassett Furniture's long position.Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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