Correlation Between Great Wall and Mazda

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

By analyzing existing cross correlation between Great Wall Motor and Mazda Motor, you can compare the effects of market volatilities on Great Wall and Mazda 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 Great Wall with a short position of Mazda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Mazda.

Diversification Opportunities for Great Wall and Mazda

-0.33

Correlation Coefficient

Great Wall  Mazda

Very good diversification

The 3 months correlation between Great and Mazda is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Mazda Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor and Great Wall 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 Great Wall Motor are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor has no effect on the direction of Great Wall i.e., Great Wall and Mazda go up and down completely randomly.

Pair Corralation between Great Wall and Mazda

Assuming the 90 days horizon Great Wall Motor is expected to under-perform the Mazda. In addition to that, Great Wall is 1.21 times more volatile than Mazda Motor. It trades about -0.15 of its total potential returns per unit of risk. Mazda Motor is currently generating about -0.09 per unit of volatility. If you would invest  750.00  in Mazda Motor on September 5, 2024 and sell it today you would lose (95.00) from holding Mazda Motor or give up 12.67% of portfolio value over 90 days.

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

Great Wall Motor  vs.  Mazda Motor

Great Wall Motor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Great Wall reported solid returns over the last few months and may actually be approaching a breakup point.

Mazda Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mazda Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Great Wall and Mazda

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

The idea behind Great Wall Motor and Mazda Motor 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.