Correlation Between Guangdong Investment and CapitaLand Investment

Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and CapitaLand 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 Guangdong Investment and CapitaLand Investment 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 CapitaLand Investment Limited, you can compare the effects of market volatilities on Guangdong Investment and CapitaLand 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 Guangdong Investment with a short position of CapitaLand Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and CapitaLand Investment.

Diversification Opportunities for Guangdong Investment and CapitaLand Investment

0.25

Correlation Coefficient

Guangdong Investment  CapitaLand Investment

Modest diversification

The 3 months correlation between Guangdong and CapitaLand is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and CapitaLand Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CapitaLand Investment 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 CapitaLand Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CapitaLand Investment has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and CapitaLand Investment go up and down completely randomly.

Pair Corralation between Guangdong Investment and CapitaLand Investment

Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the CapitaLand Investment. But the pink sheet apears to be less risky and, when comparing its historical volatility, Guangdong Investment Limited is 1.23 times less risky than CapitaLand Investment. The pink sheet trades about -0.08 of its potential returns per unit of risk. The CapitaLand Investment Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  182.00  in CapitaLand Investment Limited on December 4, 2024 and sell it today you would lose (15.00) from holding CapitaLand Investment Limited or give up 8.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	77.97%
Values	Daily Returns

Guangdong Investment Limited  vs.  CapitaLand Investment Limited

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.

CapitaLand Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days CapitaLand Investment Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Guangdong Investment and CapitaLand Investment

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

The idea behind Guangdong Investment Limited and CapitaLand 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..