Correlation Between Guangdong Investment and New World
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and New World 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 New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment and New World Development, you can compare the effects of market volatilities on Guangdong Investment and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and New World.
Diversification Opportunities for Guangdong Investment and New World
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and New is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and New World go up and down completely randomly.
Pair Corralation between Guangdong Investment and New World
Assuming the 90 days horizon Guangdong Investment is expected to generate 0.59 times more return on investment than New World. However, Guangdong Investment is 1.71 times less risky than New World. It trades about 0.04 of its potential returns per unit of risk. New World Development is currently generating about 0.01 per unit of risk. If you would invest 2,785 in Guangdong Investment on September 5, 2024 and sell it today you would earn a total of 315.00 from holding Guangdong Investment or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Guangdong Investment vs. New World Development
Performance |
| Timeline |
| Guangdong Investment |
| New World Development |
Guangdong Investment and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and New World
The main advantage of trading using opposite Guangdong Investment and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, New World 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 New World will offset losses from the drop in New World'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 |
| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
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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