Correlation Between New World and Gaucho Group
Can any of the company-specific risk be diversified away by investing in both New World and Gaucho Group 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 New World and Gaucho Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Development and Gaucho Group Holdings, you can compare the effects of market volatilities on New World and Gaucho Group 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 New World with a short position of Gaucho Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Gaucho Group.
Diversification Opportunities for New World and Gaucho Group
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and Gaucho is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Gaucho Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaucho Group Holdings and New World 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 New World Development are associated (or correlated) with Gaucho Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaucho Group Holdings has no effect on the direction of New World i.e., New World and Gaucho Group go up and down completely randomly.
Pair Corralation between New World and Gaucho Group
Assuming the 90 days horizon New World Development is expected to generate 0.37 times more return on investment than Gaucho Group. However, New World Development is 2.68 times less risky than Gaucho Group. It trades about -0.16 of its potential returns per unit of risk. Gaucho Group Holdings is currently generating about -0.22 per unit of risk. If you would invest 53.00 in New World Development on August 24, 2024 and sell it today you would lose (12.00) from holding New World Development or give up 22.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
New World Development vs. Gaucho Group Holdings
Performance |
| Timeline |
| New World Development |
| Gaucho Group Holdings |
New World and Gaucho Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Gaucho Group
The main advantage of trading using opposite New World and Gaucho Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Gaucho Group 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 Gaucho Group will offset losses from the drop in Gaucho Group's long position.| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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