Correlation Between Great Wall and Isuzu Motors

Can any of the company-specific risk be diversified away by investing in both Great Wall and Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors, you can compare the effects of market volatilities on Great Wall and Isuzu Motors 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 Isuzu Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Isuzu Motors.

Diversification Opportunities for Great Wall and Isuzu Motors

0.04

Correlation Coefficient

Great Wall  Isuzu Motors

Significant diversification

The 3 months correlation between Great and Isuzu is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Motor and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of Great Wall i.e., Great Wall and Isuzu Motors go up and down completely randomly.

Pair Corralation between Great Wall and Isuzu Motors

Assuming the 90 days horizon Great Wall Motor is expected to under-perform the Isuzu Motors. In addition to that, Great Wall is 2.57 times more volatile than Isuzu Motors. It trades about -0.01 of its total potential returns per unit of risk. Isuzu Motors is currently generating about 0.05 per unit of volatility. If you would invest  1,292  in Isuzu Motors on October 26, 2024 and sell it today you would earn a total of  50.00  from holding Isuzu Motors or generate 3.87% 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.  Isuzu Motors

Great Wall Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Wall Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Great Wall is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Isuzu Motors

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Isuzu Motors are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Isuzu Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great Wall and Isuzu Motors

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

The idea behind Great Wall Motor and Isuzu Motors 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.