Correlation Between Guangdong Investment and DENSO Dusseldorf

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

Diversification Opportunities for Guangdong Investment and DENSO Dusseldorf

-0.3

Correlation Coefficient

Guangdong Investment  DENSO Dusseldorf

Very good diversification

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

Pair Corralation between Guangdong Investment and DENSO Dusseldorf

Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the DENSO Dusseldorf. In addition to that, Guangdong Investment is 2.73 times more volatile than DENSO Dusseldorf. It trades about -0.13 of its total potential returns per unit of risk. DENSO Dusseldorf is currently generating about -0.03 per unit of volatility. If you would invest  1,323  in DENSO Dusseldorf on October 25, 2024 and sell it today you would lose (13.00) from holding DENSO Dusseldorf or give up 0.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Guangdong Investment Limited  vs.  DENSO Dusseldorf

Guangdong Investment

Risk-Adjusted Performance

10 of 100

OK

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 fragile basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

DENSO Dusseldorf

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DENSO Dusseldorf are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DENSO Dusseldorf is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Guangdong Investment and DENSO Dusseldorf

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

The idea behind Guangdong Investment Limited and DENSO Dusseldorf 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..