Correlation Between Guangdong Investment and Bank of East
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Bank of East 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 Bank of East into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment and Bank of East, you can compare the effects of market volatilities on Guangdong Investment and Bank of East 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 Bank of East. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Bank of East.
Diversification Opportunities for Guangdong Investment and Bank of East
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and Bank is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment and Bank of East in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of East 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 are associated (or correlated) with Bank of East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of East has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Bank of East go up and down completely randomly.
Pair Corralation between Guangdong Investment and Bank of East
Assuming the 90 days horizon Guangdong Investment is expected to generate 1.31 times more return on investment than Bank of East. However, Guangdong Investment is 1.31 times more volatile than Bank of East. It trades about 0.03 of its potential returns per unit of risk. Bank of East is currently generating about 0.02 per unit of risk. If you would invest 3,307 in Guangdong Investment on September 12, 2024 and sell it today you would earn a total of 311.00 from holding Guangdong Investment or generate 9.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.18% |
| Values | Daily Returns |
Guangdong Investment vs. Bank of East
Performance |
| Timeline |
| Guangdong Investment |
| Bank of East |
Guangdong Investment and Bank of East Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Bank of East
The main advantage of trading using opposite Guangdong Investment and Bank of East positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Bank of East 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 Bank of East will offset losses from the drop in Bank of East's long position.| Guangdong Investment vs. American Water Works | Guangdong Investment vs. California Water Service | Guangdong Investment vs. Middlesex Water | Guangdong Investment vs. American States Water |
| Bank of East vs. First Foundation | Bank of East vs. Metropolitan Bank Holding | Bank of East vs. MT Bank | Bank of East vs. Regions Financial |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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