Correlation Between Minerals Technologies and Guangdong Investment

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

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

Diversification Opportunities for Minerals Technologies and Guangdong Investment

0.6

Correlation Coefficient

Minerals Technologies  Guangdong Investment

Poor diversification

The 3 months correlation between Minerals and Guangdong is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Minerals Technologies and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Minerals Technologies 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 Minerals Technologies 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 Minerals Technologies i.e., Minerals Technologies and Guangdong Investment go up and down completely randomly.

Pair Corralation between Minerals Technologies and Guangdong Investment

Considering the 90-day investment horizon Minerals Technologies is expected to under-perform the Guangdong Investment. But the stock apears to be less risky and, when comparing its historical volatility, Minerals Technologies is 1.33 times less risky than Guangdong Investment. The stock trades about -0.19 of its potential returns per unit of risk. The Guangdong Investment Limited is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Guangdong Investment Limited on December 29, 2024 and sell it today you would lose (2.00) from holding Guangdong Investment Limited or give up 2.5% of portfolio value over 90 days.

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

Minerals Technologies  vs.  Guangdong Investment Limited

Minerals Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Minerals Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Minerals Technologies and Guangdong Investment

The main advantage of trading using opposite Minerals Technologies and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minerals Technologies 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 Minerals Technologies 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.