Correlation Between Geely Automobile and GUOTAI JUNAN

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

Diversification Opportunities for Geely Automobile and GUOTAI JUNAN

0.62

Correlation Coefficient

Geely Automobile  GUOTAI JUNAN

Poor diversification

The 3 months correlation between Geely and GUOTAI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and GUOTAI JUNAN SEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUOTAI JUNAN SEC 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 GUOTAI JUNAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUOTAI JUNAN SEC has no effect on the direction of Geely Automobile i.e., Geely Automobile and GUOTAI JUNAN go up and down completely randomly.

Pair Corralation between Geely Automobile and GUOTAI JUNAN

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.07 times more return on investment than GUOTAI JUNAN. However, Geely Automobile is 1.07 times more volatile than GUOTAI JUNAN SEC. It trades about -0.41 of its potential returns per unit of risk. GUOTAI JUNAN SEC is currently generating about -0.52 per unit of risk. If you would invest  194.00  in Geely Automobile Holdings on October 12, 2024 and sell it today you would lose (22.00) from holding Geely Automobile Holdings or give up 11.34% of portfolio value over 90 days.

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

Geely Automobile Holdings  vs.  GUOTAI JUNAN SEC

Geely Automobile Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

GUOTAI JUNAN SEC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GUOTAI JUNAN SEC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GUOTAI JUNAN is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Geely Automobile and GUOTAI JUNAN

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

The idea behind Geely Automobile Holdings and GUOTAI JUNAN SEC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.