Correlation Between CARRIER and Guangdong Investment

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

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

Diversification Opportunities for CARRIER and Guangdong Investment

0.12

Correlation Coefficient

CARRIER  Guangdong Investment

Average diversification

The 3 months correlation between CARRIER and Guangdong is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CARRIER GLOBAL P and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and CARRIER 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 CARRIER GLOBAL P 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 CARRIER i.e., CARRIER and Guangdong Investment go up and down completely randomly.

Pair Corralation between CARRIER and Guangdong Investment

Assuming the 90 days trading horizon CARRIER GLOBAL P is expected to under-perform the Guangdong Investment. But the bond apears to be less risky and, when comparing its historical volatility, CARRIER GLOBAL P is 1.74 times less risky than Guangdong Investment. The bond trades about -0.29 of its potential returns per unit of risk. The Guangdong Investment Limited is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Guangdong Investment Limited on December 5, 2024 and sell it today you would lose (5.00) from holding Guangdong Investment Limited or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

CARRIER GLOBAL P  vs.  Guangdong Investment Limited

CARRIER GLOBAL P

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARRIER GLOBAL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARRIER is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the 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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CARRIER and Guangdong Investment

The main advantage of trading using opposite CARRIER and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARRIER 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 CARRIER GLOBAL P 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.