Correlation Between Guangdong Investment and PennantPark Investment
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and PennantPark Investment 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 PennantPark Investment 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 PennantPark Investment, you can compare the effects of market volatilities on Guangdong Investment and PennantPark Investment 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 PennantPark Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and PennantPark Investment.
Diversification Opportunities for Guangdong Investment and PennantPark Investment
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and PennantPark is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and PennantPark Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PennantPark Investment 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 PennantPark Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PennantPark Investment has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and PennantPark Investment go up and down completely randomly.
Pair Corralation between Guangdong Investment and PennantPark Investment
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.23 times more return on investment than PennantPark Investment. However, Guangdong Investment is 2.23 times more volatile than PennantPark Investment. It trades about 0.36 of its potential returns per unit of risk. PennantPark Investment is currently generating about 0.24 per unit of risk. If you would invest 60.00 in Guangdong Investment Limited on October 10, 2024 and sell it today you would earn a total of 18.00 from holding Guangdong Investment Limited or generate 30.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Guangdong Investment Limited vs. PennantPark Investment
Performance |
| Timeline |
| Guangdong Investment |
| PennantPark Investment |
Guangdong Investment and PennantPark Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and PennantPark Investment
The main advantage of trading using opposite Guangdong Investment and PennantPark Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, PennantPark Investment 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 PennantPark Investment will offset losses from the drop in PennantPark Investment's long position.| Guangdong Investment vs. Ross Stores | Guangdong Investment vs. SPARTAN STORES | Guangdong Investment vs. ASURE SOFTWARE | Guangdong Investment vs. Kingdee International Software |
| PennantPark Investment vs. TOREX SEMICONDUCTOR LTD | PennantPark Investment vs. Carnegie Clean Energy | PennantPark Investment vs. CLEAN ENERGY FUELS | PennantPark Investment vs. ULTRA CLEAN HLDGS |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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