Correlation Between Guangdong Investment and Expand Energy
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Expand Energy 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 Guangdong Investment and Expand Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Expand Energy, you can compare the effects of market volatilities on Guangdong Investment and Expand Energy 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 Guangdong Investment with a short position of Expand Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Expand Energy.
Diversification Opportunities for Guangdong Investment and Expand Energy
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and Expand is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy and Guangdong Investment 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 Guangdong Investment Limited are associated (or correlated) with Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Expand Energy go up and down completely randomly.
Pair Corralation between Guangdong Investment and Expand Energy
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.15 times more return on investment than Expand Energy. However, Guangdong Investment is 2.15 times more volatile than Expand Energy. It trades about 0.02 of its potential returns per unit of risk. Expand Energy is currently generating about 0.03 per unit of risk. If you would invest 70.00 in Guangdong Investment Limited on September 4, 2024 and sell it today you would lose (9.00) from holding Guangdong Investment Limited or give up 12.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Expand Energy
Performance |
| Timeline |
| Guangdong Investment |
| Expand Energy |
Guangdong Investment and Expand Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Expand Energy
The main advantage of trading using opposite Guangdong Investment and Expand Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Expand Energy 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 Expand Energy will offset losses from the drop in Expand Energy's long position.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
| Expand Energy vs. Flex | Expand Energy vs. Diageo PLC ADR | Expand Energy vs. Fomento Economico Mexicano | Expand Energy vs. Willamette Valley Vineyards |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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