Correlation Between GEELY AUTOMOBILE and Datang International

Can any of the company-specific risk be diversified away by investing in both GEELY AUTOMOBILE and Datang International 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 Datang International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEELY AUTOMOBILE and Datang International Power, you can compare the effects of market volatilities on GEELY AUTOMOBILE and Datang International 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 Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEELY AUTOMOBILE and Datang International.

Diversification Opportunities for GEELY AUTOMOBILE and Datang International

0.63

Correlation Coefficient

GEELY AUTOMOBILE  Datang International

Poor diversification

The 3 months correlation between GEELY and Datang is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 are associated (or correlated) with Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Datang International go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and Datang International

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 0.96 times more return on investment than Datang International. However, GEELY AUTOMOBILE is 1.05 times less risky than Datang International. It trades about 0.08 of its potential returns per unit of risk. Datang International Power is currently generating about -0.08 per unit of risk. If you would invest  161.00  in GEELY AUTOMOBILE on September 1, 2024 and sell it today you would earn a total of  7.00  from holding GEELY AUTOMOBILE or generate 4.35% return on investment over 90 days.

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

GEELY AUTOMOBILE  vs.  Datang International Power

GEELY AUTOMOBILE

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind GEELY AUTOMOBILE and Datang International Power 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.