Correlation Between Geely Automobile and STMicroelectronics

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

Diversification Opportunities for Geely Automobile and STMicroelectronics

0.0

Correlation Coefficient

Geely Automobile  STMicroelectronics

Pay attention - limited upside

The 3 months correlation between Geely and STMicroelectronics is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Geely Automobile i.e., Geely Automobile and STMicroelectronics go up and down completely randomly.

Pair Corralation between Geely Automobile and STMicroelectronics

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 1.26 times more return on investment than STMicroelectronics. However, Geely Automobile is 1.26 times more volatile than STMicroelectronics NV. It trades about 0.06 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest  165.00  in Geely Automobile Holdings on October 24, 2024 and sell it today you would earn a total of  12.00  from holding Geely Automobile Holdings or generate 7.27% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  STMicroelectronics NV

Geely Automobile Holdings

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Geely Automobile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

STMicroelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Geely Automobile Holdings and STMicroelectronics NV 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.