Correlation Between Geely Automobile and Monument Mining

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

Diversification Opportunities for Geely Automobile and Monument Mining

0.6

Correlation Coefficient

Geely Automobile  Monument Mining

Poor diversification

The 3 months correlation between Geely and Monument is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining 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 Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of Geely Automobile i.e., Geely Automobile and Monument Mining go up and down completely randomly.

Pair Corralation between Geely Automobile and Monument Mining

Assuming the 90 days horizon Geely Automobile Holdings is expected to under-perform the Monument Mining. But the stock apears to be less risky and, when comparing its historical volatility, Geely Automobile Holdings is 3.12 times less risky than Monument Mining. The stock trades about -0.3 of its potential returns per unit of risk. The Monument Mining Limited is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Monument Mining Limited on October 10, 2024 and sell it today you would earn a total of  4.00  from holding Monument Mining Limited or generate 23.53% 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.  Monument Mining Limited

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.

Monument Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Monument Mining reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and Monument Mining

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

The idea behind Geely Automobile Holdings and Monument Mining Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.