Correlation Between Royal Bank and Geely Automobile
Can any of the company-specific risk be diversified away by investing in both Royal Bank and Geely 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 Royal Bank and Geely Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Bank of and Geely Automobile Holdings, you can compare the effects of market volatilities on Royal Bank and Geely 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 Royal Bank with a short position of Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Bank and Geely Automobile.
Diversification Opportunities for Royal Bank and Geely Automobile
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Royal and Geely is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Royal Bank of and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings and Royal Bank 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 Royal Bank of are associated (or correlated) with Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of Royal Bank i.e., Royal Bank and Geely Automobile go up and down completely randomly.
Pair Corralation between Royal Bank and Geely Automobile
Assuming the 90 days horizon Royal Bank of is expected to generate 0.5 times more return on investment than Geely Automobile. However, Royal Bank of is 2.01 times less risky than Geely Automobile. It trades about 0.19 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.06 per unit of risk. If you would invest 10,996 in Royal Bank of on September 5, 2024 and sell it today you would earn a total of 736.00 from holding Royal Bank of or generate 6.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Royal Bank of vs. Geely Automobile Holdings
Performance |
| Timeline |
| Royal Bank |
| Geely Automobile Holdings |
Royal Bank and Geely Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Bank and Geely Automobile
The main advantage of trading using opposite Royal Bank and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Bank position performs unexpectedly, Geely 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 Geely Automobile will offset losses from the drop in Geely Automobile's long position.| Royal Bank vs. Geely Automobile Holdings | Royal Bank vs. VULCAN MATERIALS | Royal Bank vs. Commercial Vehicle Group | Royal Bank vs. Sumitomo Rubber Industries |
| 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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