Correlation Between Geely Automobile and National Bank

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

Diversification Opportunities for Geely Automobile and National Bank

-0.45

Correlation Coefficient

Geely Automobile  National Bank

Very good diversification

The 3 months correlation between Geely and National is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Geely Automobile i.e., Geely Automobile and National Bank go up and down completely randomly.

Pair Corralation between Geely Automobile and National Bank

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.97 times more return on investment than National Bank. However, Geely Automobile is 1.97 times more volatile than National Bank Holdings. It trades about 0.08 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.11 per unit of risk. If you would invest  179.00  in Geely Automobile Holdings on December 28, 2024 and sell it today you would earn a total of  23.00  from holding Geely Automobile Holdings or generate 12.85% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  National Bank Holdings

Geely Automobile Holdings

Risk-Adjusted Performance

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

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Geely Automobile and National Bank

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

The idea behind Geely Automobile Holdings and National Bank Holdings 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.