Correlation Between Guangdong Investment and Software Acquisition
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Software Acquisition 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 Guangdong Investment and Software Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and Software Acquisition Group, you can compare the effects of market volatilities on Guangdong Investment and Software Acquisition 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 Guangdong Investment with a short position of Software Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Software Acquisition.
Diversification Opportunities for Guangdong Investment and Software Acquisition
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Guangdong and Software is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition and Guangdong Investment 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 Guangdong Investment Limited are associated (or correlated) with Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Software Acquisition go up and down completely randomly.
Pair Corralation between Guangdong Investment and Software Acquisition
Assuming the 90 days horizon Guangdong Investment is expected to generate 7.72 times less return on investment than Software Acquisition. But when comparing it to its historical volatility, Guangdong Investment Limited is 6.67 times less risky than Software Acquisition. It trades about 0.09 of its potential returns per unit of risk. Software Acquisition Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 110.00 in Software Acquisition Group on April 24, 2025 and sell it today you would earn a total of 30.00 from holding Software Acquisition Group or generate 27.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Guangdong Investment Limited vs. Software Acquisition Group
Performance |
| Timeline |
| Guangdong Investment |
| Software Acquisition |
Guangdong Investment and Software Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and Software Acquisition
The main advantage of trading using opposite Guangdong Investment and Software Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Software Acquisition 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 Software Acquisition will offset losses from the drop in Software Acquisition's long position.| Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. Guangdong Investment | Guangdong Investment vs. Anhui Conch Cement | Guangdong Investment vs. Beijing Enterprises Water |
| Software Acquisition vs. Astral Foods Limited | Software Acquisition vs. Rumble Inc | Software Acquisition vs. NetSol Technologies | Software Acquisition vs. John B Sanfilippo |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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