Correlation Between Alfa Financial and Geely Automobile

Can any of the company-specific risk be diversified away by investing in both Alfa Financial 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 Alfa Financial and Geely Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alfa Financial Software and Geely Automobile Holdings, you can compare the effects of market volatilities on Alfa Financial 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 Alfa Financial with a short position of Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and Geely Automobile.

Diversification Opportunities for Alfa Financial and Geely Automobile

0.33

Correlation Coefficient

Alfa Financial  Geely Automobile

Weak diversification

The 3 months correlation between Alfa and Geely is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software 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 Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and Geely Automobile go up and down completely randomly.

Pair Corralation between Alfa Financial and Geely Automobile

Assuming the 90 days trading horizon Alfa Financial is expected to generate 2.07 times less return on investment than Geely Automobile. But when comparing it to its historical volatility, Alfa Financial Software is 1.21 times less risky than Geely Automobile. It trades about 0.03 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Geely Automobile Holdings on October 25, 2024 and sell it today you would earn a total of  82.00  from holding Geely Automobile Holdings or generate 83.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alfa Financial Software  vs.  Geely Automobile Holdings

Alfa Financial Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfa Financial Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alfa Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Geely Automobile Holdings

Risk-Adjusted Performance

1 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Geely Automobile is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Alfa Financial and Geely Automobile

The main advantage of trading using opposite Alfa Financial and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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.

The idea behind Alfa Financial Software and Geely Automobile Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.