Can any of the company-specific risk be diversified away by investing in both Guangzhou Automobile and Uranium Energy 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 Guangzhou Automobile and Uranium Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangzhou Automobile Group and Uranium Energy Corp, you can compare the effects of market volatilities on Guangzhou Automobile and Uranium Energy 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 Guangzhou Automobile with a short position of Uranium Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Uranium Energy.
Diversification Opportunities for Guangzhou Automobile and Uranium Energy
The 3 months correlation between Guangzhou and Uranium is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Uranium Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uranium Energy Corp and Guangzhou Automobile 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 Guangzhou Automobile Group are associated (or correlated) with Uranium Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uranium Energy Corp has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Uranium Energy go up and down completely randomly.
Pair Corralation between Guangzhou Automobile and Uranium Energy
Assuming the 90 days horizon Guangzhou Automobile Group is expected to generate 1.65 times more return on investment than Uranium Energy. However, Guangzhou Automobile is 1.65 times more volatile than Uranium Energy Corp. It trades about 0.04 of its potential returns per unit of risk. Uranium Energy Corp is currently generating about 0.05 per unit of risk. If you would invest 41.00 in Guangzhou Automobile Group on March 6, 2024 and sell it today you would earn a total of 2.00 from holding Guangzhou Automobile Group or generate 4.88% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Guangzhou Automobile may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in Uranium Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Uranium Energy may actually be approaching a critical reversion point that can send shares even higher in July 2024.