Correlation Between Geely Automobile and Great Wall

Can any of the company-specific risk be diversified away by investing in both Geely Automobile and Great Wall 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 Great Wall 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 Great Wall Motor, you can compare the effects of market volatilities on Geely Automobile and Great Wall 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 Great Wall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Great Wall.

Diversification Opportunities for Geely Automobile and Great Wall

-0.17

Correlation Coefficient

Geely Automobile  Great Wall

Good diversification

The 3 months correlation between Geely and Great is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall 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 Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of Geely Automobile i.e., Geely Automobile and Great Wall go up and down completely randomly.

Pair Corralation between Geely Automobile and Great Wall

Assuming the 90 days horizon Geely Automobile Holdings is expected to under-perform the Great Wall. But the pink sheet apears to be less risky and, when comparing its historical volatility, Geely Automobile Holdings is 1.7 times less risky than Great Wall. The pink sheet trades about -0.25 of its potential returns per unit of risk. The Great Wall Motor is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,757  in Great Wall Motor on October 10, 2024 and sell it today you would lose (81.00) from holding Great Wall Motor or give up 4.61% of portfolio value over 90 days.

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

Geely Automobile Holdings  vs.  Great Wall Motor

Geely Automobile Holdings

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 5 (%) 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.

Great Wall Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wall Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Great Wall is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Geely Automobile and Great Wall

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

The idea behind Geely Automobile Holdings and Great Wall 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.