Correlation Between Guangdong Investment and Haier Smart

Can any of the company-specific risk be diversified away by investing in both Guangdong Investment and Haier Smart 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 Haier Smart 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 Haier Smart Home, you can compare the effects of market volatilities on Guangdong Investment and Haier Smart 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 Haier Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and Haier Smart.

Diversification Opportunities for Guangdong Investment and Haier Smart

0.49

Correlation Coefficient

Guangdong Investment  Haier Smart

Very weak diversification

The 3 months correlation between Guangdong and Haier is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and Haier Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haier Smart Home 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 Haier Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haier Smart Home has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and Haier Smart go up and down completely randomly.

Pair Corralation between Guangdong Investment and Haier Smart

Assuming the 90 days horizon Guangdong Investment is expected to generate 1.68 times less return on investment than Haier Smart. In addition to that, Guangdong Investment is 2.45 times more volatile than Haier Smart Home. It trades about 0.02 of its total potential returns per unit of risk. Haier Smart Home is currently generating about 0.08 per unit of volatility. If you would invest  99.00  in Haier Smart Home on April 1, 2025 and sell it today you would earn a total of  83.00  from holding Haier Smart Home or generate 83.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Guangdong Investment Limited  vs.  Haier Smart Home

Guangdong Investment

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Guangdong Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Haier Smart Home

Risk-Adjusted Performance

Very Weak

Over the last 90 days Haier Smart Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Haier Smart is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Guangdong Investment and Haier Smart

The main advantage of trading using opposite Guangdong Investment and Haier Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment position performs unexpectedly, Haier Smart 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 Haier Smart will offset losses from the drop in Haier Smart's long position.

The idea behind Guangdong Investment Limited and Haier Smart Home pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.