Correlation Between Guangzhou Automobile and Zapp Electric

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

Diversification Opportunities for Guangzhou Automobile and Zapp Electric

-0.25

Correlation Coefficient

Guangzhou Automobile  Zapp Electric

Very good diversification

The 3 months correlation between Guangzhou and Zapp is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Zapp Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zapp Electric Vehicles 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 Zapp Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zapp Electric Vehicles has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Zapp Electric go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and Zapp Electric

Assuming the 90 days horizon Guangzhou Automobile Group is expected to generate 1.11 times more return on investment than Zapp Electric. However, Guangzhou Automobile is 1.11 times more volatile than Zapp Electric Vehicles. It trades about 0.1 of its potential returns per unit of risk. Zapp Electric Vehicles is currently generating about 0.02 per unit of risk. If you would invest  26.00  in Guangzhou Automobile Group on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Guangzhou Automobile Group or generate 34.62% return on investment over 90 days.

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

Guangzhou Automobile Group  vs.  Zapp Electric Vehicles

Guangzhou Automobile

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Zapp Electric Vehicles

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zapp Electric Vehicles are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Zapp Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Guangzhou Automobile and Zapp Electric

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

The idea behind Guangzhou Automobile Group and Zapp Electric Vehicles 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.