Correlation Between Sime Darby and Guangzhou Automobile
Can any of the company-specific risk be diversified away by investing in both Sime Darby 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 Sime Darby and Guangzhou Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sime Darby Bhd and Guangzhou Automobile Group, you can compare the effects of market volatilities on Sime Darby 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 Sime Darby with a short position of Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Guangzhou Automobile.
Diversification Opportunities for Sime Darby and Guangzhou Automobile
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sime and Guangzhou is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Sime Darby 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 Sime Darby Bhd 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 Sime Darby i.e., Sime Darby and Guangzhou Automobile go up and down completely randomly.
Pair Corralation between Sime Darby and Guangzhou Automobile
Assuming the 90 days horizon Sime Darby is expected to generate 5.44 times less return on investment than Guangzhou Automobile. But when comparing it to its historical volatility, Sime Darby Bhd is 3.31 times less risky than Guangzhou Automobile. It trades about 0.02 of its potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 47.00 in Guangzhou Automobile Group on August 24, 2024 and sell it today you would lose (3.00) from holding Guangzhou Automobile Group or give up 6.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 72.0% |
| Values | Daily Returns |
Sime Darby Bhd vs. Guangzhou Automobile Group
Performance |
| Timeline |
| Sime Darby Bhd |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Guangzhou Automobile |
Sime Darby and Guangzhou Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sime Darby and Guangzhou Automobile
The main advantage of trading using opposite Sime Darby and Guangzhou Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sime Darby 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.| Sime Darby vs. Zapp Electric Vehicles | Sime Darby vs. First Hydrogen Corp | Sime Darby vs. Guangzhou Automobile Group | Sime Darby vs. Phoenix Motor Common |
| Guangzhou Automobile vs. Great Wall Motor | Guangzhou Automobile vs. Dongfeng Group | Guangzhou Automobile vs. Great Wall Motor | Guangzhou Automobile vs. BAIC Motor |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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