Correlation Between HNI Corp and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both HNI Corp and Guangdong 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 HNI Corp and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HNI Corp and Guangdong Investment Limited, you can compare the effects of market volatilities on HNI Corp and Guangdong 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 HNI Corp with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNI Corp and Guangdong Investment.
Diversification Opportunities for HNI Corp and Guangdong Investment
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between HNI and Guangdong is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and HNI Corp 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 HNI Corp are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of HNI Corp i.e., HNI Corp and Guangdong Investment go up and down completely randomly.
Pair Corralation between HNI Corp and Guangdong Investment
Considering the 90-day investment horizon HNI Corp is expected to generate 1.18 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, HNI Corp is 4.05 times less risky than Guangdong Investment. It trades about 0.09 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 95.00 in Guangdong Investment Limited on September 2, 2024 and sell it today you would lose (34.00) from holding Guangdong Investment Limited or give up 35.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
HNI Corp vs. Guangdong Investment Limited
Performance |
| Timeline |
| HNI Corp |
| Guangdong Investment |
HNI Corp and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HNI Corp and Guangdong Investment
The main advantage of trading using opposite HNI Corp and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HNI Corp position performs unexpectedly, Guangdong 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.The idea behind HNI Corp and Guangdong Investment Limited 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.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Endesa SA ADR | Guangdong Investment vs. HUMANA INC |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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