Correlation Between 25278XAW9 and Guangdong Investment

Can any of the company-specific risk be diversified away by investing in both 25278XAW9 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 25278XAW9 and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FANG 625 15 MAR 53 and Guangdong Investment Limited, you can compare the effects of market volatilities on 25278XAW9 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 25278XAW9 with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of 25278XAW9 and Guangdong Investment.

Diversification Opportunities for 25278XAW9 and Guangdong Investment

-0.82

Correlation Coefficient

25278XAW9  Guangdong Investment

Pay attention - limited upside

The 3 months correlation between 25278XAW9 and Guangdong is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding FANG 625 15 MAR 53 and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and 25278XAW9 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 FANG 625 15 MAR 53 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 25278XAW9 i.e., 25278XAW9 and Guangdong Investment go up and down completely randomly.

Pair Corralation between 25278XAW9 and Guangdong Investment

Assuming the 90 days trading horizon FANG 625 15 MAR 53 is expected to generate 0.37 times more return on investment than Guangdong Investment. However, FANG 625 15 MAR 53 is 2.7 times less risky than Guangdong Investment. It trades about -0.04 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.08 per unit of risk. If you would invest  10,620  in FANG 625 15 MAR 53 on December 4, 2024 and sell it today you would lose (190.00) from holding FANG 625 15 MAR 53 or give up 1.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	79.31%
Values	Daily Returns

FANG 625 15 MAR 53  vs.  Guangdong Investment Limited

FANG 625 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days FANG 625 15 MAR 53 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 25278XAW9 is not utilizing all of its potentials. The recent 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 25278XAW9 and Guangdong Investment

The main advantage of trading using opposite 25278XAW9 and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 25278XAW9 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 FANG 625 15 MAR 53 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.