Correlation Between Guangdong Investment and SP 500
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and SP 500 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 SP 500 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 SP 500 Energy, you can compare the effects of market volatilities on Guangdong Investment and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and SP 500.
Diversification Opportunities for Guangdong Investment and SP 500
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and SPNY is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and SP 500 Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 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 SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 Energy has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and SP 500 go up and down completely randomly.
Pair Corralation between Guangdong Investment and SP 500
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the SP 500. In addition to that, Guangdong Investment is 1.7 times more volatile than SP 500 Energy. It trades about -0.12 of its total potential returns per unit of risk. SP 500 Energy is currently generating about 0.31 per unit of volatility. If you would invest 67,620 in SP 500 Energy on September 2, 2024 and sell it today you would earn a total of 4,786 from holding SP 500 Energy or generate 7.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. SP 500 Energy
Performance |
| Timeline |
Guangdong Investment and SP 500 Volatility Contrast
Predicted Return Density |
| Returns |
Guangdong Investment Limited
Pair trading matchups for Guangdong Investment
SP 500 Energy
Pair trading matchups for SP 500
Pair Trading with Guangdong Investment and SP 500
The main advantage of trading using opposite Guangdong Investment and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Endesa SA ADR | Guangdong Investment vs. HUMANA INC |
| SP 500 vs. Guangdong Investment Limited | SP 500 vs. Link Real Estate | SP 500 vs. Hudson Pacific Properties | SP 500 vs. Crombie Real Estate |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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