Correlation Between Guangdong Investment and Martin Marietta
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Martin Marietta 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 Martin Marietta 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 Martin Marietta Materials, you can compare the effects of market volatilities on Guangdong Investment and Martin Marietta 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 Martin Marietta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Martin Marietta.
Diversification Opportunities for Guangdong Investment and Martin Marietta
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Guangdong and Martin is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Martin Marietta Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Marietta Materials 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 Martin Marietta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Marietta Materials has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Martin Marietta go up and down completely randomly.
Pair Corralation between Guangdong Investment and Martin Marietta
Assuming the 90 days horizon Guangdong Investment Limited is expected to generate 3.02 times more return on investment than Martin Marietta. However, Guangdong Investment is 3.02 times more volatile than Martin Marietta Materials. It trades about 0.07 of its potential returns per unit of risk. Martin Marietta Materials is currently generating about -0.33 per unit of risk. If you would invest 70.00 in Guangdong Investment Limited on October 12, 2024 and sell it today you would earn a total of 2.00 from holding Guangdong Investment Limited or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Martin Marietta Materials
Performance |
| Timeline |
| Guangdong Investment |
| Martin Marietta Materials |
Guangdong Investment and Martin Marietta Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Martin Marietta
The main advantage of trading using opposite Guangdong Investment and Martin Marietta positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Martin Marietta 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 Martin Marietta will offset losses from the drop in Martin Marietta's long position.The idea behind Guangdong Investment Limited and Martin Marietta Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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