Correlation Between Guangdong Investment and 482480AM2

Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and 482480AM2 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 482480AM2 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 KLAC 495 15 JUL 52, you can compare the effects of market volatilities on Guangdong Investment and 482480AM2 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 482480AM2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and 482480AM2.

Diversification Opportunities for Guangdong Investment and 482480AM2

-0.82

Correlation Coefficient

Guangdong Investment  482480AM2

Pay attention - limited upside

The 3 months correlation between Guangdong and 482480AM2 is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and KLAC 495 15 JUL 52 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLAC 495 15 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 482480AM2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLAC 495 15 has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and 482480AM2 go up and down completely randomly.

Pair Corralation between Guangdong Investment and 482480AM2

Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the 482480AM2. In addition to that, Guangdong Investment is 3.04 times more volatile than KLAC 495 15 JUL 52. It trades about -0.09 of its total potential returns per unit of risk. KLAC 495 15 JUL 52 is currently generating about -0.05 per unit of volatility. If you would invest  9,535  in KLAC 495 15 JUL 52 on November 29, 2024 and sell it today you would lose (211.00) from holding KLAC 495 15 JUL 52 or give up 2.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	71.67%
Values	Daily Returns

Guangdong Investment Limited  vs.  KLAC 495 15 JUL 52

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.

KLAC 495 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days KLAC 495 15 JUL 52 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 482480AM2 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Guangdong Investment and 482480AM2

The main advantage of trading using opposite Guangdong Investment and 482480AM2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, 482480AM2 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 482480AM2 will offset losses from the drop in 482480AM2's long position.

The idea behind Guangdong Investment Limited and KLAC 495 15 JUL 52 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.