Correlation Between Great Wall and Golden Friends
Can any of the company-specific risk be diversified away by investing in both Great Wall and Golden Friends 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 Great Wall and Golden Friends into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Golden Friends, you can compare the effects of market volatilities on Great Wall and Golden Friends 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 Great Wall with a short position of Golden Friends. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Golden Friends.
Diversification Opportunities for Great Wall and Golden Friends
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Great and Golden is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Golden Friends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Friends and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Golden Friends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Friends has no effect on the direction of Great Wall i.e., Great Wall and Golden Friends go up and down completely randomly.
Pair Corralation between Great Wall and Golden Friends
Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.77 times more return on investment than Golden Friends. However, Great Wall Enterprise is 1.3 times less risky than Golden Friends. It trades about -0.05 of its potential returns per unit of risk. Golden Friends is currently generating about -0.05 per unit of risk. If you would invest 5,670 in Great Wall Enterprise on September 1, 2024 and sell it today you would lose (340.00) from holding Great Wall Enterprise or give up 6.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Golden Friends
Performance |
| Timeline |
| Great Wall Enterprise |
| Golden Friends |
Great Wall and Golden Friends Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Golden Friends
The main advantage of trading using opposite Great Wall and Golden Friends positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Golden Friends 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 Golden Friends will offset losses from the drop in Golden Friends' long position.| Great Wall vs. De Licacy Industrial | Great Wall vs. Wisher Industrial Co | Great Wall vs. Tainan Enterprises Co |
| Golden Friends vs. Sunonwealth Electric Machine | Golden Friends vs. Rechi Precision Co | Golden Friends vs. Fittech Co | Golden Friends vs. C Sun Manufacturing |
Check out your portfolio center.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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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