Correlation Between Information Technology and Great Wall
Can any of the company-specific risk be diversified away by investing in both Information Technology and Great Wall 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 Information Technology and Great Wall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Technology Total and Great Wall Enterprise, you can compare the effects of market volatilities on Information Technology and Great Wall 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 Information Technology with a short position of Great Wall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and Great Wall.
Diversification Opportunities for Information Technology and Great Wall
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Information and Great is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Great Wall Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Enterprise and Information Technology 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 Information Technology Total are associated (or correlated) with Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Enterprise has no effect on the direction of Information Technology i.e., Information Technology and Great Wall go up and down completely randomly.
Pair Corralation between Information Technology and Great Wall
Assuming the 90 days trading horizon Information Technology is expected to generate 221.75 times less return on investment than Great Wall. In addition to that, Information Technology is 3.61 times more volatile than Great Wall Enterprise. It trades about 0.0 of its total potential returns per unit of risk. Great Wall Enterprise is currently generating about 0.29 per unit of volatility. If you would invest 5,100 in Great Wall Enterprise on September 13, 2024 and sell it today you would earn a total of 210.00 from holding Great Wall Enterprise or generate 4.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Information Technology Total vs. Great Wall Enterprise
Performance |
| Timeline |
| Information Technology |
| Great Wall Enterprise |
Information Technology and Great Wall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Information Technology and Great Wall
The main advantage of trading using opposite Information Technology and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Technology position performs unexpectedly, Great Wall 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 Great Wall will offset losses from the drop in Great Wall's long position.The idea behind Information Technology Total and Great Wall Enterprise 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.
| Great Wall vs. Charoen Pokphand Enterprise | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Lien Hwa Industrial | Great Wall vs. Standard Foods Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
Other Complementary Tools
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |