Correlation Between GEELY AUTOMOBILE and Jenoptik

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

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

Diversification Opportunities for GEELY AUTOMOBILE and Jenoptik

-0.42

Correlation Coefficient

GEELY AUTOMOBILE  Jenoptik

Very good diversification

The 3 months correlation between GEELY and Jenoptik is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and Jenoptik AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jenoptik AG 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 Jenoptik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jenoptik AG has no effect on the direction of GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Jenoptik go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and Jenoptik

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to under-perform the Jenoptik. But the stock apears to be less risky and, when comparing its historical volatility, GEELY AUTOMOBILE is 1.17 times less risky than Jenoptik. The stock trades about -0.15 of its potential returns per unit of risk. The Jenoptik AG is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,258  in Jenoptik AG on October 22, 2024 and sell it today you would lose (42.00) from holding Jenoptik AG or give up 1.86% of portfolio value over 90 days.

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

GEELY AUTOMOBILE  vs.  Jenoptik AG

GEELY AUTOMOBILE

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GEELY AUTOMOBILE may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Jenoptik AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jenoptik AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Jenoptik is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GEELY AUTOMOBILE and Jenoptik

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

The idea behind GEELY AUTOMOBILE and Jenoptik AG 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.