Correlation Between Great China and De Licacy
Can any of the company-specific risk be diversified away by investing in both Great China and De Licacy 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 China and De Licacy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great China Metal and De Licacy Industrial, you can compare the effects of market volatilities on Great China and De Licacy 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 China with a short position of De Licacy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great China and De Licacy.
Diversification Opportunities for Great China and De Licacy
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Great and 1464 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Great China Metal and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial and Great China 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 China Metal are associated (or correlated) with De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of Great China i.e., Great China and De Licacy go up and down completely randomly.
Pair Corralation between Great China and De Licacy
Assuming the 90 days trading horizon Great China Metal is expected to under-perform the De Licacy. But the stock apears to be less risky and, when comparing its historical volatility, Great China Metal is 3.18 times less risky than De Licacy. The stock trades about 0.0 of its potential returns per unit of risk. The De Licacy Industrial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,405 in De Licacy Industrial on September 13, 2024 and sell it today you would earn a total of 270.00 from holding De Licacy Industrial or generate 19.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Great China Metal vs. De Licacy Industrial
Performance |
| Timeline |
| Great China Metal |
| De Licacy Industrial |
Great China and De Licacy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Great China and De Licacy
The main advantage of trading using opposite Great China and De Licacy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great China position performs unexpectedly, De Licacy 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 De Licacy will offset losses from the drop in De Licacy's long position.| Great China vs. Taiwan Hon Chuan | Great China vs. Taiwan Secom Co | Great China vs. Taiwan Fu Hsing | Great China vs. Taiwan Shin Kong |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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