Correlation Between Kingdee International and Geely Automobile

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

By analyzing existing cross correlation between Kingdee International Software and Geely Automobile Holdings, you can compare the effects of market volatilities on Kingdee International and Geely 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 Kingdee International with a short position of Geely Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingdee International and Geely Automobile.

Diversification Opportunities for Kingdee International and Geely Automobile

0.44

Correlation Coefficient

Kingdee International  Geely Automobile

Very weak diversification

The 3 months correlation between Kingdee and Geely is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings and Kingdee International 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 Kingdee International Software are associated (or correlated) with Geely Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geely Automobile Holdings has no effect on the direction of Kingdee International i.e., Kingdee International and Geely Automobile go up and down completely randomly.

Pair Corralation between Kingdee International and Geely Automobile

Assuming the 90 days trading horizon Kingdee International Software is expected to generate 1.26 times more return on investment than Geely Automobile. However, Kingdee International is 1.26 times more volatile than Geely Automobile Holdings. It trades about 0.06 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about 0.05 per unit of risk. If you would invest  104.00  in Kingdee International Software on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Kingdee International Software or generate 2.88% return on investment over 90 days.

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

Kingdee International Software  vs.  Geely Automobile Holdings

Kingdee International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Geely Automobile Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingdee International and Geely Automobile

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

The idea behind Kingdee International Software and Geely Automobile Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.