Correlation Between Guandao Puer and CAC Consumer

Can any of the company-specific risk be diversified away by investing in both Guandao Puer and CAC Consumer 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 Guandao Puer and CAC Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guandao Puer Investment and CAC Consumer Goods, you can compare the effects of market volatilities on Guandao Puer and CAC Consumer 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 Guandao Puer with a short position of CAC Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guandao Puer and CAC Consumer.

Diversification Opportunities for Guandao Puer and CAC Consumer

0.0

Correlation Coefficient

Guandao Puer  CAC Consumer

Pay attention - limited upside

The 3 months correlation between Guandao and CAC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Guandao Puer Investment and CAC Consumer Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAC Consumer Goods and Guandao Puer 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 Guandao Puer Investment are associated (or correlated) with CAC Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAC Consumer Goods has no effect on the direction of Guandao Puer i.e., Guandao Puer and CAC Consumer go up and down completely randomly.

Pair Corralation between Guandao Puer and CAC Consumer

If you would invest  45.00  in Guandao Puer Investment on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Guandao Puer Investment or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.66%
Values	Daily Returns

Guandao Puer Investment  vs.  CAC Consumer Goods

Pair Trading with Guandao Puer and CAC Consumer

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

The idea behind Guandao Puer Investment and CAC Consumer Goods 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 Channel module to use Commodity Channel Index to analyze current equity momentum.