Correlation Between Companhia and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Companhia 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 Companhia and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Guangdong Investment Limited, you can compare the effects of market volatilities on Companhia 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 Companhia with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Guangdong Investment.
Diversification Opportunities for Companhia and Guangdong Investment
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Companhia and Guangdong is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Companhia 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 Companhia de Saneamento 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 Companhia i.e., Companhia and Guangdong Investment go up and down completely randomly.
Pair Corralation between Companhia and Guangdong Investment
Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 0.88 times more return on investment than Guangdong Investment. However, Companhia de Saneamento is 1.14 times less risky than Guangdong Investment. It trades about 0.21 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.09 per unit of risk. If you would invest 1,470 in Companhia de Saneamento on August 29, 2024 and sell it today you would earn a total of 140.00 from holding Companhia de Saneamento or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Guangdong Investment Limited
Performance |
| Timeline |
| Companhia de Saneamento |
| Guangdong Investment |
Companhia and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Guangdong Investment
The main advantage of trading using opposite Companhia and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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.| Companhia vs. KINGBOARD CHEMICAL | Companhia vs. CHEMICAL INDUSTRIES | Companhia vs. ASURE SOFTWARE | Companhia vs. Sanyo Chemical Industries |
| Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. TTW Public | Guangdong Investment vs. Superior Plus Corp | Guangdong Investment vs. SIVERS SEMICONDUCTORS AB |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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