Correlation Between BII Railway and Geely Automobile

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

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

Diversification Opportunities for BII Railway and Geely Automobile

-0.4

Correlation Coefficient

BII Railway  Geely Automobile

Very good diversification

The 3 months correlation between BII and Geely is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation 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 BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and Geely Automobile go up and down completely randomly.

Pair Corralation between BII Railway and Geely Automobile

Assuming the 90 days horizon BII Railway is expected to generate 7.69 times less return on investment than Geely Automobile. But when comparing it to its historical volatility, BII Railway Transportation is 1.13 times less risky than Geely Automobile. It trades about 0.02 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Geely Automobile Holdings on October 4, 2024 and sell it today you would earn a total of  82.00  from holding Geely Automobile Holdings or generate 84.54% return on investment over 90 days.

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

BII Railway Transportation  vs.  Geely Automobile Holdings

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Geely Automobile Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BII Railway and Geely Automobile

The main advantage of trading using opposite BII Railway and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.