Correlation Between Great Wall and Porsche Automobile
Can any of the company-specific risk be diversified away by investing in both Great Wall and Porsche Automobile 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 Porsche Automobile 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 Porsche Automobile Holding, you can compare the effects of market volatilities on Great Wall and Porsche Automobile 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 Porsche Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Porsche Automobile.
Diversification Opportunities for Great Wall and Porsche Automobile
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Great and Porsche is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Porsche Automobile Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobile 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 Porsche Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobile has no effect on the direction of Great Wall i.e., Great Wall and Porsche Automobile go up and down completely randomly.
Pair Corralation between Great Wall and Porsche Automobile
Assuming the 90 days horizon Great Wall Motor is expected to generate 2.73 times more return on investment than Porsche Automobile. However, Great Wall is 2.73 times more volatile than Porsche Automobile Holding. It trades about 0.11 of its potential returns per unit of risk. Porsche Automobile Holding is currently generating about -0.14 per unit of risk. If you would invest 134.00 in Great Wall Motor on September 14, 2024 and sell it today you would earn a total of 44.00 from holding Great Wall Motor or generate 32.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Great Wall Motor vs. Porsche Automobile Holding
Performance |
Timeline |
Great Wall Motor |
Porsche Automobile |
Great Wall and Porsche Automobile Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great Wall and Porsche Automobile
The main advantage of trading using opposite Great Wall and Porsche Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Porsche Automobile 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 Porsche Automobile will offset losses from the drop in Porsche Automobile's long position.Great Wall vs. Mitsubishi Motors Corp | Great Wall vs. Geely Automobile Holdings | Great Wall vs. Hyundai Motor Co | Great Wall vs. Volkswagen AG 110 |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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