Correlation Between Great Wall and Information Technology
Can any of the company-specific risk be diversified away by investing in both Great Wall and Information Technology 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 Information Technology 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 Information Technology Total, you can compare the effects of market volatilities on Great Wall and Information Technology 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 Information Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Information Technology.
Diversification Opportunities for Great Wall and Information Technology
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Great and Information is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Information Technology Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Information Technology 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 Information Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Information Technology has no effect on the direction of Great Wall i.e., Great Wall and Information Technology go up and down completely randomly.
Pair Corralation between Great Wall and Information Technology
Assuming the 90 days trading horizon Great Wall is expected to generate 2.55 times less return on investment than Information Technology. But when comparing it to its historical volatility, Great Wall Enterprise is 3.16 times less risky than Information Technology. It trades about 0.11 of its potential returns per unit of risk. Information Technology Total is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,340 in Information Technology Total on September 12, 2024 and sell it today you would earn a total of 510.00 from holding Information Technology Total or generate 11.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Great Wall Enterprise vs. Information Technology Total
Performance |
| Timeline |
| Great Wall Enterprise |
| Information Technology |
Great Wall and Information Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great Wall and Information Technology
The main advantage of trading using opposite Great Wall and Information Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Information Technology 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 Information Technology will offset losses from the drop in Information Technology's long position.| Great Wall vs. Standard Foods Corp | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Ruentex Development Co | Great Wall vs. WiseChip Semiconductor |
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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