Correlation Between 3I Group and Guaranty Trust

Can any of the company-specific risk be diversified away by investing in both 3I Group and Guaranty Trust 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 3I Group and Guaranty Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3I Group PLC and Guaranty Trust Holding, you can compare the effects of market volatilities on 3I Group and Guaranty Trust 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 3I Group with a short position of Guaranty Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3I Group and Guaranty Trust.

Diversification Opportunities for 3I Group and Guaranty Trust

0.64

Correlation Coefficient

3I Group  Guaranty Trust

Poor diversification

The 3 months correlation between III and Guaranty is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding 3I Group PLC and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding and 3I Group 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 3I Group PLC are associated (or correlated) with Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of 3I Group i.e., 3I Group and Guaranty Trust go up and down completely randomly.

Pair Corralation between 3I Group and Guaranty Trust

Assuming the 90 days trading horizon 3I Group PLC is expected to generate 0.78 times more return on investment than Guaranty Trust. However, 3I Group PLC is 1.28 times less risky than Guaranty Trust. It trades about 0.1 of its potential returns per unit of risk. Guaranty Trust Holding is currently generating about 0.08 per unit of risk. If you would invest  326,070  in 3I Group PLC on October 15, 2024 and sell it today you would earn a total of  29,430  from holding 3I Group PLC or generate 9.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

3I Group PLC  vs.  Guaranty Trust Holding

3I Group PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, 3I Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Guaranty Trust Holding

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Guaranty Trust may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with 3I Group and Guaranty Trust

The main advantage of trading using opposite 3I Group and Guaranty Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3I Group position performs unexpectedly, Guaranty Trust 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 Guaranty Trust will offset losses from the drop in Guaranty Trust's long position.

The idea behind 3I Group PLC and Guaranty Trust Holding 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.