Correlation Between Geely Automobile and GreenPower

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

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

Diversification Opportunities for Geely Automobile and GreenPower

-0.6

Correlation Coefficient

Geely Automobile  GreenPower

Excellent diversification

The 3 months correlation between Geely and GreenPower is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and GreenPower Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenPower Motor and Geely Automobile 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 Geely Automobile Holdings are associated (or correlated) with GreenPower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenPower Motor has no effect on the direction of Geely Automobile i.e., Geely Automobile and GreenPower go up and down completely randomly.

Pair Corralation between Geely Automobile and GreenPower

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 0.62 times more return on investment than GreenPower. However, Geely Automobile Holdings is 1.61 times less risky than GreenPower. It trades about 0.11 of its potential returns per unit of risk. GreenPower Motor is currently generating about -0.02 per unit of risk. If you would invest  193.00  in Geely Automobile Holdings on December 21, 2024 and sell it today you would earn a total of  46.00  from holding Geely Automobile Holdings or generate 23.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Geely Automobile Holdings  vs.  GreenPower Motor

Geely Automobile Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

GreenPower Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days GreenPower Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Geely Automobile and GreenPower

The main advantage of trading using opposite Geely Automobile and GreenPower positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Geely Automobile position performs unexpectedly, GreenPower 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 GreenPower will offset losses from the drop in GreenPower's long position.

The idea behind Geely Automobile Holdings and GreenPower Motor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.