Correlation Between GuocoLand and ECHO INVESTMENT

Can any of the company-specific risk be diversified away by investing in both GuocoLand and ECHO 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 GuocoLand and ECHO INVESTMENT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GuocoLand Limited and ECHO INVESTMENT ZY, you can compare the effects of market volatilities on GuocoLand and ECHO 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 GuocoLand with a short position of ECHO INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of GuocoLand and ECHO INVESTMENT.

Diversification Opportunities for GuocoLand and ECHO INVESTMENT

0.81

Correlation Coefficient

GuocoLand  ECHO INVESTMENT

Very poor diversification

The 3 months correlation between GuocoLand and ECHO is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding GuocoLand Limited and ECHO INVESTMENT ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECHO INVESTMENT ZY and GuocoLand 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 GuocoLand Limited are associated (or correlated) with ECHO INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECHO INVESTMENT ZY has no effect on the direction of GuocoLand i.e., GuocoLand and ECHO INVESTMENT go up and down completely randomly.

Pair Corralation between GuocoLand and ECHO INVESTMENT

Assuming the 90 days trading horizon GuocoLand Limited is expected to generate 0.35 times more return on investment than ECHO INVESTMENT. However, GuocoLand Limited is 2.83 times less risky than ECHO INVESTMENT. It trades about 0.2 of its potential returns per unit of risk. ECHO INVESTMENT ZY is currently generating about 0.06 per unit of risk. If you would invest  97.00  in GuocoLand Limited on September 3, 2024 and sell it today you would earn a total of  9.00  from holding GuocoLand Limited or generate 9.28% return on investment over 90 days.

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

GuocoLand Limited  vs.  ECHO INVESTMENT ZY

GuocoLand Limited

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GuocoLand Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GuocoLand may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ECHO INVESTMENT ZY

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECHO INVESTMENT ZY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ECHO INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GuocoLand and ECHO INVESTMENT

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

The idea behind GuocoLand Limited and ECHO INVESTMENT ZY 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.