Correlation Between Geely Automobile and AP Mller

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

Diversification Opportunities for Geely Automobile and AP Mller

0.79

Correlation Coefficient

Geely Automobile  AP Mller

Poor diversification

The 3 months correlation between Geely and DP4A is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Mller 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 AP Mller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Mller has no effect on the direction of Geely Automobile i.e., Geely Automobile and AP Mller go up and down completely randomly.

Pair Corralation between Geely Automobile and AP Mller

Assuming the 90 days horizon Geely Automobile is expected to generate 1.31 times less return on investment than AP Mller. In addition to that, Geely Automobile is 1.17 times more volatile than AP Mller . It trades about 0.06 of its total potential returns per unit of risk. AP Mller is currently generating about 0.1 per unit of volatility. If you would invest  133,863  in AP Mller on December 20, 2024 and sell it today you would earn a total of  19,537  from holding AP Mller or generate 14.59% 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.  AP Mller

Geely Automobile Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 5 (%) 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.

AP Mller

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AP Mller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and AP Mller

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

The idea behind Geely Automobile Holdings and AP Mller 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 Stocks Directory module to find actively traded stocks across global markets.