Correlation Between North American and GLG LIFE
Can any of the company-specific risk be diversified away by investing in both North American and GLG LIFE 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 North American and GLG LIFE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and GLG LIFE TECH, you can compare the effects of market volatilities on North American and GLG LIFE 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 North American with a short position of GLG LIFE. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and GLG LIFE.
Diversification Opportunities for North American and GLG LIFE
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between North and GLG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and GLG LIFE TECH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLG LIFE TECH and North American 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 North American Construction are associated (or correlated) with GLG LIFE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLG LIFE TECH has no effect on the direction of North American i.e., North American and GLG LIFE go up and down completely randomly.
Pair Corralation between North American and GLG LIFE
Assuming the 90 days horizon North American is expected to generate 31.42 times less return on investment than GLG LIFE. But when comparing it to its historical volatility, North American Construction is 18.05 times less risky than GLG LIFE. It trades about 0.04 of its potential returns per unit of risk. GLG LIFE TECH is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 0.40 in GLG LIFE TECH on September 3, 2024 and sell it today you would earn a total of 1.60 from holding GLG LIFE TECH or generate 400.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. GLG LIFE TECH
Performance |
| Timeline |
| North American Const |
| GLG LIFE TECH |
North American and GLG LIFE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and GLG LIFE
The main advantage of trading using opposite North American and GLG LIFE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American position performs unexpectedly, GLG LIFE 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 GLG LIFE will offset losses from the drop in GLG LIFE's long position.| North American vs. Halliburton | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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