Correlation Between PCCW and Guangdong Investment

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

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

Diversification Opportunities for PCCW and Guangdong Investment

0.37

Correlation Coefficient

PCCW  Guangdong Investment

Weak diversification

The 3 months correlation between PCCW and Guangdong is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PCCW Limited and Guangdong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and PCCW 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 PCCW Limited 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 PCCW i.e., PCCW and Guangdong Investment go up and down completely randomly.

Pair Corralation between PCCW and Guangdong Investment

Assuming the 90 days horizon PCCW is expected to generate 2.13 times less return on investment than Guangdong Investment. In addition to that, PCCW is 1.34 times more volatile than Guangdong Investment. It trades about 0.03 of its total potential returns per unit of risk. Guangdong Investment is currently generating about 0.08 per unit of volatility. If you would invest  3,618  in Guangdong Investment on December 21, 2024 and sell it today you would earn a total of  451.00  from holding Guangdong Investment or generate 12.47% return on investment over 90 days.

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

PCCW Limited  vs.  Guangdong Investment

PCCW Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PCCW Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, PCCW may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Guangdong Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Guangdong Investment showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PCCW and Guangdong Investment

The main advantage of trading using opposite PCCW and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PCCW 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 PCCW Limited and Guangdong Investment 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.