Correlation Between GUINEA INSURANCE and GOLDEN GUINEA

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

By analyzing existing cross correlation between GUINEA INSURANCE PLC and GOLDEN GUINEA BREWERIES, you can compare the effects of market volatilities on GUINEA INSURANCE and GOLDEN GUINEA 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 GUINEA INSURANCE with a short position of GOLDEN GUINEA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUINEA INSURANCE and GOLDEN GUINEA.

Diversification Opportunities for GUINEA INSURANCE and GOLDEN GUINEA

0.62

Correlation Coefficient

GUINEA INSURANCE  GOLDEN GUINEA

Poor diversification

The 3 months correlation between GUINEA and GOLDEN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GUINEA INSURANCE PLC and GOLDEN GUINEA BREWERIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDEN GUINEA BREWERIES and GUINEA INSURANCE 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 GUINEA INSURANCE PLC are associated (or correlated) with GOLDEN GUINEA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDEN GUINEA BREWERIES has no effect on the direction of GUINEA INSURANCE i.e., GUINEA INSURANCE and GOLDEN GUINEA go up and down completely randomly.

Pair Corralation between GUINEA INSURANCE and GOLDEN GUINEA

Assuming the 90 days trading horizon GUINEA INSURANCE is expected to generate 2.99 times less return on investment than GOLDEN GUINEA. In addition to that, GUINEA INSURANCE is 1.27 times more volatile than GOLDEN GUINEA BREWERIES. It trades about 0.11 of its total potential returns per unit of risk. GOLDEN GUINEA BREWERIES is currently generating about 0.43 per unit of volatility. If you would invest  315.00  in GOLDEN GUINEA BREWERIES on September 14, 2024 and sell it today you would earn a total of  473.00  from holding GOLDEN GUINEA BREWERIES or generate 150.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

GUINEA INSURANCE PLC  vs.  GOLDEN GUINEA BREWERIES

GUINEA INSURANCE PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GUINEA INSURANCE PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, GUINEA INSURANCE demonstrated solid returns over the last few months and may actually be approaching a breakup point.

GOLDEN GUINEA BREWERIES

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDEN GUINEA BREWERIES are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical and fundamental indicators, GOLDEN GUINEA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUINEA INSURANCE and GOLDEN GUINEA

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

The idea behind GUINEA INSURANCE PLC and GOLDEN GUINEA BREWERIES 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.