Correlation Between Aston Martin and Guangzhou Automobile

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Can any of the company-specific risk be diversified away by investing in both Aston Martin and Guangzhou Automobile 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 Aston Martin and Guangzhou Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aston Martin Lagonda and Guangzhou Automobile Group, you can compare the effects of market volatilities on Aston Martin and Guangzhou Automobile 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 Aston Martin with a short position of Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aston Martin and Guangzhou Automobile.

Diversification Opportunities for Aston Martin and Guangzhou Automobile

AstonGuangzhouDiversified AwayAstonGuangzhouDiversified Away100%
-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Aston and Guangzhou is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Aston Martin Lagonda and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Aston Martin 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 Aston Martin Lagonda are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Aston Martin i.e., Aston Martin and Guangzhou Automobile go up and down completely randomly.

Pair Corralation between Aston Martin and Guangzhou Automobile

Assuming the 90 days horizon Aston Martin Lagonda is expected to under-perform the Guangzhou Automobile. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aston Martin Lagonda is 2.56 times less risky than Guangzhou Automobile. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Guangzhou Automobile Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  38.00  in Guangzhou Automobile Group on November 26, 2024 and sell it today you would earn a total of  3.00  from holding Guangzhou Automobile Group or generate 7.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy65.17%
ValuesDaily Returns

Aston Martin Lagonda  vs.  Guangzhou Automobile Group

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -1001020
JavaScript chart by amCharts 3.21.15ARGGY GNZUF
       Timeline  
Aston Martin Lagonda 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Aston Martin Lagonda are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aston Martin showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1.151.21.251.31.351.41.451.51.551.6
Guangzhou Automobile 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Automobile reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanFebDecJanFeb0.320.340.360.380.40.420.440.46

Aston Martin and Guangzhou Automobile Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.38-6.27-4.17-2.070.0352.064.186.318.4410.56 0.010.020.030.040.05
JavaScript chart by amCharts 3.21.15ARGGY GNZUF
       Returns  

Pair Trading with Aston Martin and Guangzhou Automobile

The main advantage of trading using opposite Aston Martin and Guangzhou Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aston Martin position performs unexpectedly, Guangzhou Automobile 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 Guangzhou Automobile will offset losses from the drop in Guangzhou Automobile's long position.
The idea behind Aston Martin Lagonda and Guangzhou Automobile Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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