Correlation Between Far East and GEELY AUTOMOBILE

Can any of the company-specific risk be diversified away by investing in both Far East 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 Far East and GEELY AUTOMOBILE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Far East Horizon and GEELY AUTOMOBILE, you can compare the effects of market volatilities on Far East 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 Far East with a short position of GEELY AUTOMOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Far East and GEELY AUTOMOBILE.

Diversification Opportunities for Far East and GEELY AUTOMOBILE

0.68

Correlation Coefficient

Far East  GEELY AUTOMOBILE

Poor diversification

The 3 months correlation between Far and GEELY is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Far East Horizon and GEELY AUTOMOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEELY AUTOMOBILE and Far East 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 Far East Horizon 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 has no effect on the direction of Far East i.e., Far East and GEELY AUTOMOBILE go up and down completely randomly.

Pair Corralation between Far East and GEELY AUTOMOBILE

Assuming the 90 days horizon Far East Horizon is expected to generate 2.06 times more return on investment than GEELY AUTOMOBILE. However, Far East is 2.06 times more volatile than GEELY AUTOMOBILE. It trades about 0.04 of its potential returns per unit of risk. GEELY AUTOMOBILE is currently generating about 0.06 per unit of risk. If you would invest  41.00  in Far East Horizon on October 23, 2024 and sell it today you would earn a total of  23.00  from holding Far East Horizon or generate 56.1% return on investment over 90 days.

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

Far East Horizon  vs.  GEELY AUTOMOBILE

Far East Horizon

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Far East Horizon are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Far East reported solid returns over the last few months and may actually be approaching a breakup point.

GEELY AUTOMOBILE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GEELY AUTOMOBILE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Far East and GEELY AUTOMOBILE

The main advantage of trading using opposite Far East and GEELY AUTOMOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Far East 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 Far East Horizon and GEELY AUTOMOBILE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.