Correlation Between Nissan and Great Wall

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

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

Diversification Opportunities for Nissan and Great Wall

0.15

Correlation Coefficient

Nissan  Great Wall

Average diversification

The 3 months correlation between Nissan and Great is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nissan Motor Co 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 Nissan 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 Nissan Motor Co 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 Nissan i.e., Nissan and Great Wall go up and down completely randomly.

Pair Corralation between Nissan and Great Wall

Assuming the 90 days horizon Nissan Motor Co is expected to generate 1.65 times more return on investment than Great Wall. However, Nissan is 1.65 times more volatile than Great Wall Motor. It trades about 0.1 of its potential returns per unit of risk. Great Wall Motor is currently generating about 0.06 per unit of risk. If you would invest  228.00  in Nissan Motor Co on December 13, 2024 and sell it today you would earn a total of  67.00  from holding Nissan Motor Co or generate 29.39% return on investment over 90 days.

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

Nissan Motor Co  vs.  Great Wall Motor

Nissan Motor

Risk-Adjusted Performance

OK

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

Great Wall Motor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Great Wall showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nissan and Great Wall

The main advantage of trading using opposite Nissan and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nissan 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 Nissan Motor Co 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.