Correlation Between Mazda and Great Wall

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

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

Diversification Opportunities for Mazda and Great Wall

0.21

Correlation Coefficient

Mazda  Great Wall

Modest diversification

The 3 months correlation between Mazda and Great is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Mazda Motor Corp and Great Wall Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Wall Motor and Mazda 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 Mazda Motor Corp are associated (or correlated) with Great Wall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Wall Motor has no effect on the direction of Mazda i.e., Mazda and Great Wall go up and down completely randomly.

Pair Corralation between Mazda and Great Wall

Assuming the 90 days horizon Mazda Motor Corp is expected to generate 0.59 times more return on investment than Great Wall. However, Mazda Motor Corp is 1.69 times less risky than Great Wall. It trades about -0.03 of its potential returns per unit of risk. Great Wall Motor is currently generating about -0.03 per unit of risk. If you would invest  340.00  in Mazda Motor Corp on October 23, 2024 and sell it today you would lose (19.00) from holding Mazda Motor Corp or give up 5.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Mazda Motor Corp  vs.  Great Wall Motor

Mazda Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Mazda and Great Wall

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

The idea behind Mazda Motor Corp and Great Wall 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.