Correlation Between Guangdong Investment and PCCW
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and PCCW 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 PCCW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment and PCCW Limited, you can compare the effects of market volatilities on Guangdong Investment and PCCW 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 PCCW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and PCCW.
Diversification Opportunities for Guangdong Investment and PCCW
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Guangdong and PCCW is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment and PCCW Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCCW Limited 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 PCCW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCCW Limited has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and PCCW go up and down completely randomly.
Pair Corralation between Guangdong Investment and PCCW
Assuming the 90 days horizon Guangdong Investment is expected to under-perform the PCCW. But the pink sheet apears to be less risky and, when comparing its historical volatility, Guangdong Investment is 3.31 times less risky than PCCW. The pink sheet trades about -0.17 of its potential returns per unit of risk. The PCCW Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 568.00 in PCCW Limited on November 5, 2024 and sell it today you would earn a total of 42.00 from holding PCCW Limited or generate 7.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment vs. PCCW Limited
Performance |
| Timeline |
| Guangdong Investment |
| PCCW Limited |
Guangdong Investment and PCCW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and PCCW
The main advantage of trading using opposite Guangdong Investment and PCCW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, PCCW 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 PCCW will offset losses from the drop in PCCW's long position.| Guangdong Investment vs. Artesian Resources | Guangdong Investment vs. California Water Service | Guangdong Investment vs. Middlesex Water | Guangdong Investment vs. Pure Cycle |
| PCCW vs. PCCW Limited | PCCW vs. New World Development | PCCW vs. Guangdong Investment | PCCW vs. Bank of East |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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