Correlation Between PCCW and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both PCCW 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 PCCW and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PCCW Limited and Guangdong Investment, you can compare the effects of market volatilities on PCCW 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 PCCW with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of PCCW and Guangdong Investment.
Diversification Opportunities for PCCW and Guangdong Investment
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between PCCW and Guangdong is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PCCW Limited and Guangdong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and PCCW 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 PCCW Limited 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 PCCW i.e., PCCW and Guangdong Investment go up and down completely randomly.
Pair Corralation between PCCW and Guangdong Investment
Assuming the 90 days horizon PCCW is expected to generate 1.2 times less return on investment than Guangdong Investment. But when comparing it to its historical volatility, PCCW Limited is 1.16 times less risky than Guangdong Investment. It trades about 0.04 of its potential returns per unit of risk. Guangdong Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,785 in Guangdong Investment on September 5, 2024 and sell it today you would earn a total of 315.00 from holding Guangdong Investment or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
PCCW Limited vs. Guangdong Investment
Performance |
| Timeline |
| PCCW Limited |
| Guangdong Investment |
PCCW and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PCCW and Guangdong Investment
The main advantage of trading using opposite PCCW and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PCCW 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.| PCCW vs. Telenor ASA ADR | PCCW vs. Hellenic Telecommunications Org | PCCW vs. Orange SA ADR | PCCW vs. Telefonica SA ADR |
| Guangdong Investment vs. American Water Works | Guangdong Investment vs. California Water Service | Guangdong Investment vs. Middlesex Water | Guangdong Investment vs. American States Water |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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