Correlation Between GEELY AUTOMOBILE and Far East

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

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

Diversification Opportunities for GEELY AUTOMOBILE and Far East

0.66

Correlation Coefficient

GEELY AUTOMOBILE  Far East

Poor diversification

The 3 months correlation between GEELY and Far is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and Far East Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far East Horizon 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 Far East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far East Horizon has no effect on the direction of GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Far East go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and Far East

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 1.2 times less return on investment than Far East. But when comparing it to its historical volatility, GEELY AUTOMOBILE is 2.05 times less risky than Far East. It trades about 0.06 of its potential returns per unit of risk. Far East Horizon is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Far East Horizon on October 8, 2024 and sell it today you would earn a total of  20.00  from holding Far East Horizon or generate 46.51% 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.  Far East Horizon

GEELY AUTOMOBILE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Far East Horizon

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Far East Horizon are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Far East reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GEELY AUTOMOBILE and Far East

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

The idea behind GEELY AUTOMOBILE and Far East Horizon 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.