Correlation Between Guangdong Investment and PSI Software

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

Diversification Opportunities for Guangdong Investment and PSI Software

0.27

Correlation Coefficient

Guangdong Investment  PSI Software

Modest diversification

The 3 months correlation between Guangdong and PSI is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited and PSI Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSI Software AG 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 PSI Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSI Software AG has no effect on the direction of Guangdong Investment i.e., Guangdong Investment and PSI Software go up and down completely randomly.

Pair Corralation between Guangdong Investment and PSI Software

Assuming the 90 days horizon Guangdong Investment is expected to generate 1.31 times less return on investment than PSI Software. In addition to that, Guangdong Investment is 1.05 times more volatile than PSI Software AG. It trades about 0.1 of its total potential returns per unit of risk. PSI Software AG is currently generating about 0.13 per unit of volatility. If you would invest  2,600  in PSI Software AG on April 20, 2025 and sell it today you would earn a total of  450.00  from holding PSI Software AG or generate 17.31% return on investment over 90 days.

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

Guangdong Investment Limited  vs.  PSI Software AG

Guangdong Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Guangdong Investment reported solid returns over the last few months and may actually be approaching a breakup point.

PSI Software AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PSI Software AG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, PSI Software exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Investment and PSI Software

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

The idea behind Guangdong Investment Limited and PSI Software AG 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.