Correlation Between CHINA SOUTHN and Geely Automobile
Can any of the company-specific risk be diversified away by investing in both CHINA SOUTHN 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 CHINA SOUTHN and Geely Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA SOUTHN AIR H and Geely Automobile Holdings, you can compare the effects of market volatilities on CHINA SOUTHN 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 CHINA SOUTHN with a short position of Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and Geely Automobile.
Diversification Opportunities for CHINA SOUTHN and Geely Automobile
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHINA and Geely is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H 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 CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and Geely Automobile go up and down completely randomly.
Pair Corralation between CHINA SOUTHN and Geely Automobile
Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to under-perform the Geely Automobile. In addition to that, CHINA SOUTHN is 1.89 times more volatile than Geely Automobile Holdings. It trades about -0.25 of its total potential returns per unit of risk. Geely Automobile Holdings is currently generating about -0.09 per unit of volatility. If you would invest 185.00 in Geely Automobile Holdings on October 25, 2024 and sell it today you would lose (5.00) from holding Geely Automobile Holdings or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA SOUTHN AIR H vs. Geely Automobile Holdings
Performance |
| Timeline |
| CHINA SOUTHN AIR |
| Geely Automobile Holdings |
CHINA SOUTHN and Geely Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA SOUTHN and Geely Automobile
The main advantage of trading using opposite CHINA SOUTHN and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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.| CHINA SOUTHN vs. RYANAIR HLDGS ADR | CHINA SOUTHN vs. Westinghouse Air Brake | CHINA SOUTHN vs. BROADWIND ENRGY | CHINA SOUTHN vs. Delta Air Lines |
| Geely Automobile vs. Air New Zealand | Geely Automobile vs. Pentair plc | Geely Automobile vs. CHINA SOUTHN AIR H | Geely Automobile vs. Spirent Communications plc |
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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