Correlation Between Geely Automobile and Great Wall
Can any of the company-specific risk be diversified away by investing in both Geely Automobile and Great Wall 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 Geely Automobile and Great Wall into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Geely Automobile Holdings and Great Wall Motor, you can compare the effects of market volatilities on Geely Automobile and Great Wall 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 Geely Automobile with a short position of Great Wall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Great Wall.
Diversification Opportunities for Geely Automobile and Great Wall
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Geely and Great is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor and Geely 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 Geely Automobile Holdings are associated (or correlated) with Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of Geely Automobile i.e., Geely Automobile and Great Wall go up and down completely randomly.
Pair Corralation between Geely Automobile and Great Wall
Assuming the 90 days horizon Geely Automobile is expected to generate 3.46 times less return on investment than Great Wall. But when comparing it to its historical volatility, Geely Automobile Holdings is 1.89 times less risky than Great Wall. It trades about 0.02 of its potential returns per unit of risk. Great Wall Motor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 122.00 in Great Wall Motor on August 28, 2024 and sell it today you would earn a total of 45.00 from holding Great Wall Motor or generate 36.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.09% |
| Values | Daily Returns |
Geely Automobile Holdings vs. Great Wall Motor
Performance |
| Timeline |
| Geely Automobile Holdings |
| Great Wall Motor |
Geely Automobile and Great Wall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geely Automobile and Great Wall
The main advantage of trading using opposite Geely Automobile and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile position performs unexpectedly, Great Wall 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 Great Wall will offset losses from the drop in Great Wall's long position.| Geely Automobile vs. Great Wall Motor | Geely Automobile vs. Polestar Automotive Holding | Geely Automobile vs. Dowlais Group plc | Geely Automobile vs. BYD Company Limited |
| Great Wall vs. Mitsubishi Motors Corp | Great Wall vs. Geely Automobile Holdings | Great Wall vs. Hyundai Motor Co | Great Wall vs. Volkswagen AG 110 |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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