Correlation Between American States and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both American States and Guangdong Investment 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 American States and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American States Water and Guangdong Investment, you can compare the effects of market volatilities on American States and Guangdong Investment 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 American States with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Guangdong Investment.
Diversification Opportunities for American States and Guangdong Investment
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Guangdong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and Guangdong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and American States 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 American States Water are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of American States i.e., American States and Guangdong Investment go up and down completely randomly.
Pair Corralation between American States and Guangdong Investment
Considering the 90-day investment horizon American States is expected to generate 3.77 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, American States Water is 4.42 times less risky than Guangdong Investment. It trades about 0.08 of its potential returns per unit of risk. Guangdong Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,709 in Guangdong Investment on September 2, 2024 and sell it today you would earn a total of 391.00 from holding Guangdong Investment or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
American States Water vs. Guangdong Investment
Performance |
| Timeline |
| American States Water |
| Guangdong Investment |
American States and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American States and Guangdong Investment
The main advantage of trading using opposite American States and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| American States vs. Middlesex Water | American States vs. SJW Group Common | American States vs. The York Water | American States vs. Artesian Resources |
| Guangdong Investment vs. American Water Works | Guangdong Investment vs. California Water Service | Guangdong Investment vs. Middlesex Water | Guangdong Investment vs. American States Water |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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