Correlation Between Montauk Renewables and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Montauk Renewables 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 Montauk Renewables and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Montauk Renewables and Guangdong Investment Limited, you can compare the effects of market volatilities on Montauk Renewables 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 Montauk Renewables with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montauk Renewables and Guangdong Investment.
Diversification Opportunities for Montauk Renewables and Guangdong Investment
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Montauk and Guangdong is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and Guangdong Investment go up and down completely randomly.
Pair Corralation between Montauk Renewables and Guangdong Investment
Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Guangdong Investment. But the stock apears to be less risky and, when comparing its historical volatility, Montauk Renewables is 1.31 times less risky than Guangdong Investment. The stock trades about -0.01 of its potential returns per unit of risk. The Guangdong Investment Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 90.00 in Guangdong Investment Limited on August 31, 2024 and sell it today you would lose (29.00) from holding Guangdong Investment Limited or give up 32.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.59% |
| Values | Daily Returns |
Montauk Renewables vs. Guangdong Investment Limited
Performance |
| Timeline |
| Montauk Renewables |
| Guangdong Investment |
Montauk Renewables and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Montauk Renewables and Guangdong Investment
The main advantage of trading using opposite Montauk Renewables and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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.| Montauk Renewables vs. Avista | Montauk Renewables vs. Allete Inc | Montauk Renewables vs. Black Hills | Montauk Renewables vs. Companhia Paranaense de |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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