Correlation Between Geely Automobile and Grupo Carso

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

Diversification Opportunities for Geely Automobile and Grupo Carso

0.4

Correlation Coefficient

Geely Automobile  Grupo Carso

Very weak diversification

The 3 months correlation between Geely and Grupo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Grupo Carso SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Carso SAB 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 Grupo Carso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Carso SAB has no effect on the direction of Geely Automobile i.e., Geely Automobile and Grupo Carso go up and down completely randomly.

Pair Corralation between Geely Automobile and Grupo Carso

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 0.92 times more return on investment than Grupo Carso. However, Geely Automobile Holdings is 1.08 times less risky than Grupo Carso. It trades about 0.15 of its potential returns per unit of risk. Grupo Carso SAB is currently generating about 0.02 per unit of risk. If you would invest  93.00  in Geely Automobile Holdings on August 31, 2024 and sell it today you would earn a total of  76.00  from holding Geely Automobile Holdings or generate 81.72% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  Grupo Carso SAB

Geely Automobile Holdings

Risk-Adjusted Performance

15 of 100

Good

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 uncertain basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo Carso 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 Grupo Carso

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

The idea behind Geely Automobile Holdings and Grupo Carso SAB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.