Correlation Between Mazda and Great Wall

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

Diversification Opportunities for Mazda and Great Wall

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Mazda and Great is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor 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 Mazda 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 Mazda Motor 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 Mazda i.e., Mazda and Great Wall go up and down completely randomly.

Pair Corralation between Mazda and Great Wall

Assuming the 90 days horizon Mazda Motor is expected to under-perform the Great Wall. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mazda Motor is 1.42 times less risky than Great Wall. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Great Wall Motor is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  144.00  in Great Wall Motor on September 3, 2024 and sell it today you would earn a total of  20.00  from holding Great Wall Motor or generate 13.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy94.44%
ValuesDaily Returns

Mazda Motor  vs.  Great Wall Motor

 Performance 
       Timeline  
Mazda Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mazda Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Great Wall Motor 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Great Wall reported solid returns over the last few months and may actually be approaching a breakup point.

Mazda and Great Wall Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mazda and Great Wall

The main advantage of trading using opposite Mazda and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mazda 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.
The idea behind Mazda Motor and Great Wall Motor 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.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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