Correlation Between G-III Apparel and China Water
Can any of the company-specific risk be diversified away by investing in both G-III Apparel and China Water 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 G-III Apparel and China Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G III Apparel Group and China Water Affairs, you can compare the effects of market volatilities on G-III Apparel and China Water 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 G-III Apparel with a short position of China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of G-III Apparel and China Water.
Diversification Opportunities for G-III Apparel and China Water
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between G-III and China is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding G III Apparel Group and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs and G-III Apparel 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 G III Apparel Group are associated (or correlated) with China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of G-III Apparel i.e., G-III Apparel and China Water go up and down completely randomly.
Pair Corralation between G-III Apparel and China Water
Assuming the 90 days horizon G III Apparel Group is expected to generate 0.74 times more return on investment than China Water. However, G III Apparel Group is 1.36 times less risky than China Water. It trades about 0.2 of its potential returns per unit of risk. China Water Affairs is currently generating about -0.04 per unit of risk. If you would invest 2,720 in G III Apparel Group on September 5, 2024 and sell it today you would earn a total of 280.00 from holding G III Apparel Group or generate 10.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
G III Apparel Group vs. China Water Affairs
Performance |
| Timeline |
| G III Apparel |
| China Water Affairs |
G-III Apparel and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G-III Apparel and China Water
The main advantage of trading using opposite G-III Apparel and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G-III Apparel position performs unexpectedly, China Water 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 China Water will offset losses from the drop in China Water's long position.The idea behind G III Apparel Group and China Water Affairs pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| China Water vs. Grupo Carso SAB | China Water vs. AM EAGLE OUTFITTERS | China Water vs. G III Apparel Group | China Water vs. Mitsui Chemicals |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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