Correlation Between Geely Automobile and Takara Holdings

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

Diversification Opportunities for Geely Automobile and Takara Holdings

0.35

Correlation Coefficient

Geely Automobile  Takara Holdings

Weak diversification

The 3 months correlation between Geely and Takara is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Takara Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Takara 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 Takara Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Takara Holdings has no effect on the direction of Geely Automobile i.e., Geely Automobile and Takara Holdings go up and down completely randomly.

Pair Corralation between Geely Automobile and Takara Holdings

Assuming the 90 days horizon Geely Automobile Holdings is expected to under-perform the Takara Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Geely Automobile Holdings is 1.36 times less risky than Takara Holdings. The stock trades about -0.31 of its potential returns per unit of risk. The Takara Holdings is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  775.00  in Takara Holdings on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Takara Holdings or generate 0.0% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  Takara Holdings

Geely Automobile Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 9 (%) 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.

Takara Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Takara Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Takara Holdings 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 Takara Holdings

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

The idea behind Geely Automobile Holdings and Takara 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 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.