Correlation Between Gordon Auto and Kaulin Mfg
Can any of the company-specific risk be diversified away by investing in both Gordon Auto and Kaulin Mfg 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 Gordon Auto and Kaulin Mfg into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gordon Auto Body and Kaulin Mfg, you can compare the effects of market volatilities on Gordon Auto and Kaulin Mfg 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 Gordon Auto with a short position of Kaulin Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gordon Auto and Kaulin Mfg.
Diversification Opportunities for Gordon Auto and Kaulin Mfg
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gordon and Kaulin is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Gordon Auto Body and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg and Gordon Auto 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 Gordon Auto Body are associated (or correlated) with Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of Gordon Auto i.e., Gordon Auto and Kaulin Mfg go up and down completely randomly.
Pair Corralation between Gordon Auto and Kaulin Mfg
Assuming the 90 days trading horizon Gordon Auto Body is expected to generate 0.7 times more return on investment than Kaulin Mfg. However, Gordon Auto Body is 1.43 times less risky than Kaulin Mfg. It trades about 0.17 of its potential returns per unit of risk. Kaulin Mfg is currently generating about 0.07 per unit of risk. If you would invest 3,180 in Gordon Auto Body on September 12, 2024 and sell it today you would earn a total of 755.00 from holding Gordon Auto Body or generate 23.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gordon Auto Body vs. Kaulin Mfg
Performance |
| Timeline |
| Gordon Auto Body |
| Kaulin Mfg |
Gordon Auto and Kaulin Mfg Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gordon Auto and Kaulin Mfg
The main advantage of trading using opposite Gordon Auto and Kaulin Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gordon Auto position performs unexpectedly, Kaulin Mfg 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 Kaulin Mfg will offset losses from the drop in Kaulin Mfg's long position.| Gordon Auto vs. Kaulin Mfg | Gordon Auto vs. Tex Ray Industrial Co | Gordon Auto vs. De Licacy Industrial | Gordon Auto vs. Kwong Fong Industries |
| Kaulin Mfg vs. Yang Ming Marine | Kaulin Mfg vs. Wan Hai Lines | Kaulin Mfg vs. U Ming Marine Transport | Kaulin Mfg vs. Taiwan Navigation Co |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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