Correlation Between Geely Automobile and Renault SA
Can any of the company-specific risk be diversified away by investing in both Geely Automobile and Renault SA 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 Renault SA 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 Renault SA, you can compare the effects of market volatilities on Geely Automobile and Renault SA 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 Renault SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Renault SA.
Diversification Opportunities for Geely Automobile and Renault SA
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Geely and Renault is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Geely Automobile i.e., Geely Automobile and Renault SA go up and down completely randomly.
Pair Corralation between Geely Automobile and Renault SA
Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.61 times more return on investment than Renault SA. However, Geely Automobile is 1.61 times more volatile than Renault SA. It trades about 0.1 of its potential returns per unit of risk. Renault SA is currently generating about -0.05 per unit of risk. If you would invest 2,475 in Geely Automobile Holdings on September 3, 2024 and sell it today you would earn a total of 1,103 from holding Geely Automobile Holdings or generate 44.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geely Automobile Holdings vs. Renault SA
Performance |
| Timeline |
| Geely Automobile Holdings |
| Renault SA |
Geely Automobile and Renault SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geely Automobile and Renault SA
The main advantage of trading using opposite Geely Automobile and Renault SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile position performs unexpectedly, Renault SA 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 Renault SA will offset losses from the drop in Renault SA'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 |
| Renault SA vs. Mazda Motor | Renault SA vs. Subaru Corp ADR | Renault SA vs. Bayerische Motoren Werke | Renault SA vs. Isuzu Motors |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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