Correlation Between Kingspan Group and Geely Automobile

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

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

Diversification Opportunities for Kingspan Group and Geely Automobile

-0.51

Correlation Coefficient

Kingspan Group  Geely Automobile

Excellent diversification

The 3 months correlation between Kingspan and Geely is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Kingspan Group plc 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 Kingspan Group 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 Kingspan Group plc 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 Kingspan Group i.e., Kingspan Group and Geely Automobile go up and down completely randomly.

Pair Corralation between Kingspan Group and Geely Automobile

Assuming the 90 days trading horizon Kingspan Group plc is expected to generate 0.87 times more return on investment than Geely Automobile. However, Kingspan Group plc is 1.15 times less risky than Geely Automobile. It trades about 0.02 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about -0.17 per unit of risk. If you would invest  6,890  in Kingspan Group plc on October 26, 2024 and sell it today you would earn a total of  20.00  from holding Kingspan Group plc or generate 0.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Kingspan Group plc  vs.  Geely Automobile Holdings

Kingspan Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingspan Group plc 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Geely Automobile Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Geely Automobile Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Geely Automobile is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kingspan Group and Geely Automobile

The main advantage of trading using opposite Kingspan Group and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingspan Group 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 Kingspan Group plc 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.