Correlation Between Guangzhou Automobile and NFI

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

Diversification Opportunities for Guangzhou Automobile and NFI

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Guangzhou and NFI is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Guangzhou 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 Guangzhou Automobile Group are associated (or correlated) with NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and NFI go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and NFI

Assuming the 90 days horizon Guangzhou Automobile Group is expected to generate 3.06 times more return on investment than NFI. However, Guangzhou Automobile is 3.06 times more volatile than NFI Group. It trades about 0.01 of its potential returns per unit of risk. NFI Group is currently generating about -0.27 per unit of risk. If you would invest  41.00  in Guangzhou Automobile Group on August 28, 2024 and sell it today you would lose (1.00) from holding Guangzhou Automobile Group or give up 2.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Guangzhou Automobile Group  vs.  NFI Group

 Performance 
       Timeline  
Guangzhou Automobile 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 6 (%) 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.
NFI Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Guangzhou Automobile and NFI Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Guangzhou Automobile and NFI

The main advantage of trading using opposite Guangzhou Automobile and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Automobile position performs unexpectedly, NFI 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 NFI will offset losses from the drop in NFI's long position.
The idea behind Guangzhou Automobile Group and NFI 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.
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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