Correlation Between Geely Automobile and Materialise

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

Diversification Opportunities for Geely Automobile and Materialise

0.68

Correlation Coefficient

Geely Automobile  Materialise

Poor diversification

The 3 months correlation between Geely and Materialise is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Materialise NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materialise NV 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 Materialise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materialise NV has no effect on the direction of Geely Automobile i.e., Geely Automobile and Materialise go up and down completely randomly.

Pair Corralation between Geely Automobile and Materialise

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.12 times more return on investment than Materialise. However, Geely Automobile is 1.12 times more volatile than Materialise NV. It trades about 0.2 of its potential returns per unit of risk. Materialise NV is currently generating about 0.2 per unit of risk. If you would invest  103.00  in Geely Automobile Holdings on September 4, 2024 and sell it today you would earn a total of  64.00  from holding Geely Automobile Holdings or generate 62.14% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  Materialise NV

Geely Automobile Holdings

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Materialise NV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and Materialise

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

The idea behind Geely Automobile Holdings and Materialise NV 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.