Correlation Between Guangzhou Automobile and NFI

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

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

Diversification Opportunities for Guangzhou Automobile and NFI

-0.08

Correlation Coefficient

Guangzhou Automobile  NFI

Good diversification

The 3 months correlation between Guangzhou and NFI is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group and Guangzhou 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 Guangzhou Automobile Group are associated (or correlated) with NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and NFI go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and NFI

Assuming the 90 days horizon Guangzhou Automobile Group is expected to under-perform the NFI. In addition to that, Guangzhou Automobile is 1.06 times more volatile than NFI Group. It trades about -0.03 of its total potential returns per unit of risk. NFI Group is currently generating about -0.03 per unit of volatility. If you would invest  953.00  in NFI Group on December 29, 2024 and sell it today you would lose (137.00) from holding NFI Group or give up 14.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Guangzhou Automobile Group  vs.  NFI Group

Guangzhou Automobile

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou Automobile Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NFI Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days NFI Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Guangzhou Automobile and NFI

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

The idea behind Guangzhou Automobile Group and NFI Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.