Correlation Between Geely Automobile and CHINA HUARONG
Can any of the company-specific risk be diversified away by investing in both Geely Automobile and CHINA HUARONG 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 CHINA HUARONG 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 CHINA HUARONG ENERHD 50, you can compare the effects of market volatilities on Geely Automobile and CHINA HUARONG 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 CHINA HUARONG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and CHINA HUARONG.
Diversification Opportunities for Geely Automobile and CHINA HUARONG
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Geely and CHINA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and CHINA HUARONG ENERHD 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA HUARONG ENERHD 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 CHINA HUARONG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA HUARONG ENERHD has no effect on the direction of Geely Automobile i.e., Geely Automobile and CHINA HUARONG go up and down completely randomly.
Pair Corralation between Geely Automobile and CHINA HUARONG
Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 0.22 times more return on investment than CHINA HUARONG. However, Geely Automobile Holdings is 4.52 times less risky than CHINA HUARONG. It trades about 0.06 of its potential returns per unit of risk. CHINA HUARONG ENERHD 50 is currently generating about -0.03 per unit of risk. If you would invest 170.00 in Geely Automobile Holdings on September 5, 2024 and sell it today you would earn a total of 5.00 from holding Geely Automobile Holdings or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Geely Automobile Holdings vs. CHINA HUARONG ENERHD 50
Performance |
| Timeline |
| Geely Automobile Holdings |
| CHINA HUARONG ENERHD |
Geely Automobile and CHINA HUARONG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Geely Automobile and CHINA HUARONG
The main advantage of trading using opposite Geely Automobile and CHINA HUARONG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile position performs unexpectedly, CHINA HUARONG 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 CHINA HUARONG will offset losses from the drop in CHINA HUARONG's long position.| Geely Automobile vs. Tesla Inc | Geely Automobile vs. BYD Company Limited | Geely Automobile vs. Superior Plus Corp | Geely Automobile vs. NMI Holdings |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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