Correlation Between GEELY AUTOMOBILE and Volkswagen

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

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

Diversification Opportunities for GEELY AUTOMOBILE and Volkswagen

-0.54

Correlation Coefficient

GEELY AUTOMOBILE  Volkswagen

Excellent diversification

The 3 months correlation between GEELY and Volkswagen is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and Volkswagen AG VZO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG VZO 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG VZO has no effect on the direction of GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Volkswagen go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and Volkswagen

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 1.9 times more return on investment than Volkswagen. However, GEELY AUTOMOBILE is 1.9 times more volatile than Volkswagen AG VZO. It trades about 0.09 of its potential returns per unit of risk. Volkswagen AG VZO is currently generating about -0.02 per unit of risk. If you would invest  96.00  in GEELY AUTOMOBILE on September 28, 2024 and sell it today you would earn a total of  90.00  from holding GEELY AUTOMOBILE or generate 93.75% return on investment over 90 days.

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

GEELY AUTOMOBILE  vs.  Volkswagen AG VZO

GEELY AUTOMOBILE

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 12 (%) 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.

Volkswagen AG VZO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG VZO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with GEELY AUTOMOBILE and Volkswagen

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

The idea behind GEELY AUTOMOBILE and Volkswagen AG VZO 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.