Correlation Between Guangdong Investment and CARRIER

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

Diversification Opportunities for Guangdong Investment and CARRIER

0.12

Correlation Coefficient

Guangdong Investment  CARRIER

Average diversification

The 3 months correlation between Guangdong and CARRIER is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and CARRIER GLOBAL P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARRIER GLOBAL P 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 CARRIER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARRIER GLOBAL P has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and CARRIER go up and down completely randomly.

Pair Corralation between Guangdong Investment and CARRIER

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.09 times more return on investment than CARRIER. However, Guangdong Investment is 2.09 times more volatile than CARRIER GLOBAL P. It trades about -0.07 of its potential returns per unit of risk. CARRIER GLOBAL P is currently generating about -0.17 per unit of risk. If you would invest  80.00  in Guangdong Investment Limited on December 5, 2024 and sell it today you would lose (5.00) from holding Guangdong Investment Limited or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	76.92%
Values	Daily Returns

Guangdong Investment Limited  vs.  CARRIER GLOBAL P

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.

CARRIER GLOBAL P

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARRIER 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 CARRIER

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

The idea behind Guangdong Investment Limited and CARRIER GLOBAL P 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.