Correlation Between IMPERIAL TOBACCO and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Guangdong Investment Limited, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Guangdong Investment.
Diversification Opportunities for IMPERIAL TOBACCO and Guangdong Investment
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between IMPERIAL and Guangdong is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Guangdong Investment go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Guangdong Investment
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 4.35 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 6.42 times less risky than Guangdong Investment. It trades about 0.11 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 14.00 in Guangdong Investment Limited on November 27, 2024 and sell it today you would earn a total of 57.00 from holding Guangdong Investment Limited or generate 407.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. Guangdong Investment Limited
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| Guangdong Investment |
IMPERIAL TOBACCO and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Guangdong Investment
The main advantage of trading using opposite IMPERIAL TOBACCO and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. CVW CLEANTECH INC | IMPERIAL TOBACCO vs. Jacquet Metal Service | IMPERIAL TOBACCO vs. Sims Metal Management | IMPERIAL TOBACCO vs. Waste Management |
| Guangdong Investment vs. GREENX METALS LTD | Guangdong Investment vs. GLG LIFE TECH | Guangdong Investment vs. Addtech AB | Guangdong Investment vs. FIREWEED METALS P |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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