Correlation Between Geely Automobile and SPORTING

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

Diversification Opportunities for Geely Automobile and SPORTING

-0.07

Correlation Coefficient

Geely Automobile  SPORTING

Good diversification

The 3 months correlation between Geely and SPORTING is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and SPORTING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORTING 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 SPORTING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORTING has no effect on the direction of Geely Automobile i.e., Geely Automobile and SPORTING go up and down completely randomly.

Pair Corralation between Geely Automobile and SPORTING

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.15 times more return on investment than SPORTING. However, Geely Automobile is 1.15 times more volatile than SPORTING. It trades about 0.08 of its potential returns per unit of risk. SPORTING is currently generating about 0.02 per unit of risk. If you would invest  92.00  in Geely Automobile Holdings on October 4, 2024 and sell it today you would earn a total of  87.00  from holding Geely Automobile Holdings or generate 94.57% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  SPORTING

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.

SPORTING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Geely Automobile and SPORTING

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

The idea behind Geely Automobile Holdings and SPORTING 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.