Correlation Between Geely Automobile and Sterling Construction

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

Diversification Opportunities for Geely Automobile and Sterling Construction

0.49

Correlation Coefficient

Geely Automobile  Sterling Construction

Very weak diversification

The 3 months correlation between Geely and Sterling is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Geely Automobile i.e., Geely Automobile and Sterling Construction go up and down completely randomly.

Pair Corralation between Geely Automobile and Sterling Construction

Assuming the 90 days horizon Geely Automobile Holdings is expected to under-perform the Sterling Construction. But the stock apears to be less risky and, when comparing its historical volatility, Geely Automobile Holdings is 1.51 times less risky than Sterling Construction. The stock trades about -0.3 of its potential returns per unit of risk. The Sterling Construction is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  17,355  in Sterling Construction on October 9, 2024 and sell it today you would lose (1,190) from holding Sterling Construction or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

Geely Automobile Holdings  vs.  Sterling Construction

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.

Sterling Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and Sterling Construction

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

The idea behind Geely Automobile Holdings and Sterling Construction 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 CEOs Directory module to screen CEOs from public companies around the world.