Correlation Between Guangdong Investment and 686330AJ0

Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and 686330AJ0 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 686330AJ0 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 ORIX P 37, you can compare the effects of market volatilities on Guangdong Investment and 686330AJ0 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 686330AJ0. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and 686330AJ0.

Diversification Opportunities for Guangdong Investment and 686330AJ0

0.3

Correlation Coefficient

Guangdong Investment  686330AJ0

Weak diversification

The 3 months correlation between Guangdong and 686330AJ0 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and ORIX P 37 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX P 37 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 686330AJ0. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX P 37 has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and 686330AJ0 go up and down completely randomly.

Pair Corralation between Guangdong Investment and 686330AJ0

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 11.45 times more return on investment than 686330AJ0. However, Guangdong Investment is 11.45 times more volatile than ORIX P 37. It trades about 0.13 of its potential returns per unit of risk. ORIX P 37 is currently generating about -0.31 per unit of risk. If you would invest  58.00  in Guangdong Investment Limited on September 14, 2024 and sell it today you would earn a total of  25.00  from holding Guangdong Investment Limited or generate 43.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	42.86%
Values	Daily Returns

Guangdong Investment Limited  vs.  ORIX P 37

Guangdong Investment

Risk-Adjusted Performance

10 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

ORIX P 37

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ORIX P 37 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ORIX P 37 investors.

Pair Trading with Guangdong Investment and 686330AJ0

The main advantage of trading using opposite Guangdong Investment and 686330AJ0 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, 686330AJ0 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 686330AJ0 will offset losses from the drop in 686330AJ0's long position.

The idea behind Guangdong Investment Limited and ORIX P 37 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.