Correlation Between Guangdong Investment and FirstGroup Plc
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and FirstGroup Plc 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 FirstGroup Plc 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 FirstGroup plc, you can compare the effects of market volatilities on Guangdong Investment and FirstGroup Plc 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 FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and FirstGroup Plc.
Diversification Opportunities for Guangdong Investment and FirstGroup Plc
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and FirstGroup is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc 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 FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and FirstGroup Plc go up and down completely randomly.
Pair Corralation between Guangdong Investment and FirstGroup Plc
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 2.21 times more return on investment than FirstGroup Plc. However, Guangdong Investment is 2.21 times more volatile than FirstGroup plc. It trades about 0.13 of its potential returns per unit of risk. FirstGroup plc is currently generating about 0.08 per unit of risk. If you would invest 58.00 in Guangdong Investment Limited on November 3, 2024 and sell it today you would earn a total of 11.00 from holding Guangdong Investment Limited or generate 18.97% 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. FirstGroup plc
Performance |
| Timeline |
| Guangdong Investment |
| FirstGroup plc |
Guangdong Investment and FirstGroup Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and FirstGroup Plc
The main advantage of trading using opposite Guangdong Investment and FirstGroup Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, FirstGroup Plc 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 FirstGroup Plc will offset losses from the drop in FirstGroup Plc's long position.| Guangdong Investment vs. Hollywood Bowl Group | Guangdong Investment vs. Tencent Music Entertainment | Guangdong Investment vs. PROSIEBENSAT1 MEDIADR4 | Guangdong Investment vs. Benchmark Electronics |
| FirstGroup Plc vs. Take Two Interactive Software | FirstGroup Plc vs. Broadridge Financial Solutions | FirstGroup Plc vs. Gold Road Resources | FirstGroup Plc vs. Unity Software |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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