Correlation Between Old Republic and Guangdong Investment

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

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

Diversification Opportunities for Old Republic and Guangdong Investment

-0.07

Correlation Coefficient

Old Republic  Guangdong Investment

Good diversification

The 3 months correlation between Old and Guangdong is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Old Republic International and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Old Republic 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 Old Republic International 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 Old Republic i.e., Old Republic and Guangdong Investment go up and down completely randomly.

Pair Corralation between Old Republic and Guangdong Investment

Considering the 90-day investment horizon Old Republic International is expected to generate 0.67 times more return on investment than Guangdong Investment. However, Old Republic International is 1.49 times less risky than Guangdong Investment. It trades about 0.2 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.01 per unit of risk. If you would invest  3,384  in Old Republic International on December 29, 2024 and sell it today you would earn a total of  521.00  from holding Old Republic International or generate 15.4% return on investment over 90 days.

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

Old Republic International  vs.  Guangdong Investment Limited

Old Republic Interna

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Old Republic International are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Old Republic demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 Old Republic and Guangdong Investment

The main advantage of trading using opposite Old Republic and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Republic 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 Old Republic International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.