Correlation Between Geely Automobile and Porsche Automobile

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

Diversification Opportunities for Geely Automobile and Porsche Automobile

-0.53

Correlation Coefficient

Geely Automobile  Porsche Automobile

Excellent diversification

The 3 months correlation between Geely and Porsche is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Porsche Automobile Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobile 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 Porsche Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobile has no effect on the direction of Geely Automobile i.e., Geely Automobile and Porsche Automobile go up and down completely randomly.

Pair Corralation between Geely Automobile and Porsche Automobile

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 2.32 times more return on investment than Porsche Automobile. However, Geely Automobile is 2.32 times more volatile than Porsche Automobile Holding. It trades about 0.23 of its potential returns per unit of risk. Porsche Automobile Holding is currently generating about -0.11 per unit of risk. If you would invest  2,315  in Geely Automobile Holdings on September 12, 2024 and sell it today you would earn a total of  1,708  from holding Geely Automobile Holdings or generate 73.78% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  Porsche Automobile Holding

Geely Automobile Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Geely Automobile showed solid returns over the last few months and may actually be approaching a breakup point.

Porsche Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobile Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Geely Automobile and Porsche Automobile

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

The idea behind Geely Automobile Holdings and Porsche Automobile Holding 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.