Correlation Between Geely Automobile and Carsales
Can any of the company-specific risk be diversified away by investing in both Geely Automobile and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on Geely Automobile and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Carsales.
Diversification Opportunities for Geely Automobile and Carsales
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Geely and Carsales is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Geely Automobile i.e., Geely Automobile and Carsales go up and down completely randomly.
Pair Corralation between Geely Automobile and Carsales
Assuming the 90 days horizon Geely Automobile is expected to generate 15.38 times less return on investment than Carsales. In addition to that, Geely Automobile is 2.73 times more volatile than CarsalesCom. It trades about 0.01 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.38 per unit of volatility. If you would invest 2,220 in CarsalesCom on August 25, 2024 and sell it today you would earn a total of 260.00 from holding CarsalesCom or generate 11.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Geely Automobile Holdings vs. CarsalesCom
Performance |
| Timeline |
| Geely Automobile Holdings |
| CarsalesCom |
Geely Automobile and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geely Automobile and Carsales
The main advantage of trading using opposite Geely Automobile and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| Geely Automobile vs. Tesla Inc | Geely Automobile vs. BYD Company Limited | Geely Automobile vs. Superior Plus Corp | Geely Automobile vs. NMI Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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