Correlation Between Guangdong Investment and United Insurance
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and United Insurance 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 United Insurance 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 United Insurance Holdings, you can compare the effects of market volatilities on Guangdong Investment and United Insurance 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 United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and United Insurance.
Diversification Opportunities for Guangdong Investment and United Insurance
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Guangdong and United is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings 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 United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and United Insurance go up and down completely randomly.
Pair Corralation between Guangdong Investment and United Insurance
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 1.15 times more return on investment than United Insurance. However, Guangdong Investment is 1.15 times more volatile than United Insurance Holdings. It trades about -0.04 of its potential returns per unit of risk. United Insurance Holdings is currently generating about -0.25 per unit of risk. If you would invest 73.00 in Guangdong Investment Limited on October 13, 2024 and sell it today you would lose (2.00) from holding Guangdong Investment Limited or give up 2.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. United Insurance Holdings
Performance |
| Timeline |
| Guangdong Investment |
| United Insurance Holdings |
Guangdong Investment and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and United Insurance
The main advantage of trading using opposite Guangdong Investment and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, United Insurance 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 United Insurance will offset losses from the drop in United Insurance's long position.| Guangdong Investment vs. SOLSTAD OFFSHORE NK | Guangdong Investment vs. TT Electronics PLC | Guangdong Investment vs. Suntory Beverage Food | Guangdong Investment vs. Delta Electronics Public |
| United Insurance vs. Guangdong Investment Limited | United Insurance vs. CompuGroup Medical SE | United Insurance vs. Japan Asia Investment | United Insurance vs. Apollo Investment Corp |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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