Correlation Between Guangdong Investment and Air New
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Air New 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 Air New 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 Air New Zealand, you can compare the effects of market volatilities on Guangdong Investment and Air New 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 Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Air New.
Diversification Opportunities for Guangdong Investment and Air New
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and Air is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Air New go up and down completely randomly.
Pair Corralation between Guangdong Investment and Air New
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.96 times more return on investment than Air New. However, Guangdong Investment is 2.96 times more volatile than Air New Zealand. It trades about 0.1 of its potential returns per unit of risk. Air New Zealand is currently generating about 0.02 per unit of risk. If you would invest 23.00 in Guangdong Investment Limited on November 3, 2024 and sell it today you would earn a total of 46.00 from holding Guangdong Investment Limited or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Air New Zealand
Performance |
| Timeline |
| Guangdong Investment |
| Air New Zealand |
Guangdong Investment and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Air New
The main advantage of trading using opposite Guangdong Investment and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New's long position.| Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Companhia de Saneamento | Guangdong Investment vs. TTW Public |
| Air New vs. National Retail Properties | Air New vs. CARSALESCOM | Air New vs. H2O Retailing | Air New vs. TRADEGATE |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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