Correlation Between Guangdong Investment and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Coffee Holding 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 Coffee Holding 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 Coffee Holding Co, you can compare the effects of market volatilities on Guangdong Investment and Coffee Holding 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 Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Coffee Holding.
Diversification Opportunities for Guangdong Investment and Coffee Holding
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and Coffee is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding 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 Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Coffee Holding go up and down completely randomly.
Pair Corralation between Guangdong Investment and Coffee Holding
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the Coffee Holding. In addition to that, Guangdong Investment is 1.06 times more volatile than Coffee Holding Co. It trades about -0.1 of its total potential returns per unit of risk. Coffee Holding Co is currently generating about 0.02 per unit of volatility. If you would invest 376.00 in Coffee Holding Co on November 6, 2024 and sell it today you would earn a total of 2.00 from holding Coffee Holding Co or generate 0.53% 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. Coffee Holding Co
Performance |
| Timeline |
| Guangdong Investment |
| Coffee Holding |
Guangdong Investment and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Coffee Holding
The main advantage of trading using opposite Guangdong Investment and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.| Guangdong Investment vs. International Consolidated Airlines | Guangdong Investment vs. Sixt Leasing SE | Guangdong Investment vs. SOUTHWEST AIRLINES | Guangdong Investment vs. United Rentals |
| Coffee Holding vs. Nestl SA | Coffee Holding vs. Kraft Heinz Co | Coffee Holding vs. General Mills | Coffee Holding vs. General Mills |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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