Correlation Between Ferrari NV and Guangzhou Automobile
Can any of the company-specific risk be diversified away by investing in both Ferrari NV and Guangzhou Automobile 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 Ferrari NV and Guangzhou Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and Guangzhou Automobile Group, you can compare the effects of market volatilities on Ferrari NV and Guangzhou Automobile 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 Ferrari NV with a short position of Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and Guangzhou Automobile.
Diversification Opportunities for Ferrari NV and Guangzhou Automobile
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ferrari and Guangzhou is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Ferrari NV 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 Ferrari NV are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Ferrari NV i.e., Ferrari NV and Guangzhou Automobile go up and down completely randomly.
Pair Corralation between Ferrari NV and Guangzhou Automobile
Given the investment horizon of 90 days Ferrari NV is expected to under-perform the Guangzhou Automobile. But the stock apears to be less risky and, when comparing its historical volatility, Ferrari NV is 2.97 times less risky than Guangzhou Automobile. The stock trades about -0.23 of its potential returns per unit of risk. The Guangzhou Automobile Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 37.00 in Guangzhou Automobile Group on August 31, 2024 and sell it today you would lose (2.00) from holding Guangzhou Automobile Group or give up 5.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. Guangzhou Automobile Group
Performance |
| Timeline |
| Ferrari NV |
| Guangzhou Automobile |
Ferrari NV and Guangzhou Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and Guangzhou Automobile
The main advantage of trading using opposite Ferrari NV and Guangzhou Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV position performs unexpectedly, Guangzhou Automobile 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 Guangzhou Automobile will offset losses from the drop in Guangzhou Automobile's long position.| Ferrari NV vs. Tesla Inc | Ferrari NV vs. Li Auto | Ferrari NV vs. Rivian Automotive | Ferrari NV vs. Lucid Group |
| Guangzhou Automobile vs. Volkswagen AG 110 | Guangzhou Automobile vs. Stellantis NV | Guangzhou Automobile vs. Toyota Motor | Guangzhou Automobile vs. Honda Motor Co |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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