Correlation Between Essential Utilities and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Essential Utilities 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 Essential Utilities and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essential Utilities and Guangdong Investment Limited, you can compare the effects of market volatilities on Essential Utilities 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 Essential Utilities with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Utilities and Guangdong Investment.
Diversification Opportunities for Essential Utilities and Guangdong Investment
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Essential and Guangdong is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Essential Utilities and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Essential Utilities 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 Essential Utilities 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 Essential Utilities i.e., Essential Utilities and Guangdong Investment go up and down completely randomly.
Pair Corralation between Essential Utilities and Guangdong Investment
Given the investment horizon of 90 days Essential Utilities is expected to generate 0.9 times more return on investment than Guangdong Investment. However, Essential Utilities is 1.11 times less risky than Guangdong Investment. It trades about -0.15 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.16 per unit of risk. If you would invest 3,618 in Essential Utilities on October 20, 2024 and sell it today you would lose (117.00) from holding Essential Utilities or give up 3.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Essential Utilities vs. Guangdong Investment Limited
Performance |
| Timeline |
| Essential Utilities |
| Guangdong Investment |
Essential Utilities and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essential Utilities and Guangdong Investment
The main advantage of trading using opposite Essential Utilities and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Utilities 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.| Essential Utilities vs. American States Water | Essential Utilities vs. California Water Service | Essential Utilities vs. Consolidated Water Co | Essential Utilities vs. SJW Group Common |
| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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