Correlation Between GLOBUS MEDICAL-A and Guangdong Investment

Can any of the company-specific risk be diversified away by investing in both GLOBUS MEDICAL-A and Guangdong 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 GLOBUS MEDICAL-A and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GLOBUS MEDICAL A and Guangdong Investment Limited, you can compare the effects of market volatilities on GLOBUS MEDICAL-A and Guangdong 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 GLOBUS MEDICAL-A with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of GLOBUS MEDICAL-A and Guangdong Investment.

Diversification Opportunities for GLOBUS MEDICAL-A and Guangdong Investment

0.63

Correlation Coefficient

GLOBUS MEDICAL-A  Guangdong Investment

Poor diversification

The 3 months correlation between GLOBUS and Guangdong is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GLOBUS MEDICAL A and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and GLOBUS MEDICAL-A 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 GLOBUS MEDICAL A are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of GLOBUS MEDICAL-A i.e., GLOBUS MEDICAL-A and Guangdong Investment go up and down completely randomly.

Pair Corralation between GLOBUS MEDICAL-A and Guangdong Investment

Assuming the 90 days trading horizon GLOBUS MEDICAL-A is expected to generate 9.95 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, GLOBUS MEDICAL A is 3.51 times less risky than Guangdong Investment. It trades about 0.03 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  16.00  in Guangdong Investment Limited on October 3, 2024 and sell it today you would earn a total of  64.00  from holding Guangdong Investment Limited or generate 400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

GLOBUS MEDICAL A  vs.  Guangdong Investment Limited

GLOBUS MEDICAL A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBUS MEDICAL A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, GLOBUS MEDICAL-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Investment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GLOBUS MEDICAL-A and Guangdong Investment

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

The idea behind GLOBUS MEDICAL A and Guangdong 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..