Correlation Between Geely Automobile and Hercules Capital

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

Diversification Opportunities for Geely Automobile and Hercules Capital

0.64

Correlation Coefficient

Geely Automobile  Hercules Capital

Poor diversification

The 3 months correlation between Geely and Hercules is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital 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 Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of Geely Automobile i.e., Geely Automobile and Hercules Capital go up and down completely randomly.

Pair Corralation between Geely Automobile and Hercules Capital

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.51 times more return on investment than Hercules Capital. However, Geely Automobile is 1.51 times more volatile than Hercules Capital. It trades about 0.06 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.08 per unit of risk. If you would invest  95.00  in Geely Automobile Holdings on October 4, 2024 and sell it today you would earn a total of  84.00  from holding Geely Automobile Holdings or generate 88.42% 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.  Hercules Capital

Geely Automobile Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 7 (%) 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.

Hercules Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hercules Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Geely Automobile and Hercules Capital

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

The idea behind Geely Automobile Holdings and Hercules Capital 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.