Correlation Between Guangdong Investment and State Bank

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

Diversification Opportunities for Guangdong Investment and State Bank

0.6

Correlation Coefficient

Guangdong Investment  State Bank

Poor diversification

The 3 months correlation between Guangdong and State is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank 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 State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and State Bank go up and down completely randomly.

Pair Corralation between Guangdong Investment and State Bank

Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.24 times more return on investment than State Bank. However, Guangdong Investment is 2.24 times more volatile than State Bank of. It trades about -0.02 of its potential returns per unit of risk. State Bank of is currently generating about -0.23 per unit of risk. If you would invest  77.00  in Guangdong Investment Limited on December 21, 2024 and sell it today you would lose (4.00) from holding Guangdong Investment Limited or give up 5.19% of portfolio value over 90 days.

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

Guangdong Investment Limited  vs.  State Bank of

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 nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

State Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Guangdong Investment and State Bank

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

The idea behind Guangdong Investment Limited and State Bank of 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 Commodity Directory module to find actively traded commodities issued by global exchanges.