Correlation Between Guangdong Investment and Essential Utilities
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Essential Utilities 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 Essential Utilities 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 Essential Utilities, you can compare the effects of market volatilities on Guangdong Investment and Essential Utilities 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 Essential Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Essential Utilities.
Diversification Opportunities for Guangdong Investment and Essential Utilities
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Guangdong and Essential is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Essential Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Utilities 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 Essential Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Utilities has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Essential Utilities go up and down completely randomly.
Pair Corralation between Guangdong Investment and Essential Utilities
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 4.36 times more return on investment than Essential Utilities. However, Guangdong Investment is 4.36 times more volatile than Essential Utilities. It trades about 0.02 of its potential returns per unit of risk. Essential Utilities is currently generating about 0.01 per unit of risk. If you would invest 82.00 in Guangdong Investment Limited on August 27, 2024 and sell it today you would lose (20.00) from holding Guangdong Investment Limited or give up 24.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 97.86% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Essential Utilities
Performance |
| Timeline |
| Guangdong Investment |
| Essential Utilities |
Guangdong Investment and Essential Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Essential Utilities
The main advantage of trading using opposite Guangdong Investment and Essential Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Essential Utilities 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 Essential Utilities will offset losses from the drop in Essential Utilities' long position.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
| Essential Utilities vs. American States Water | Essential Utilities vs. California Water Service | Essential Utilities vs. Consolidated Water Co | Essential Utilities vs. SJW Group Common |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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