Correlation Between Porsche Automobil and Great Wall

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

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

Diversification Opportunities for Porsche Automobil and Great Wall

-0.02

Correlation Coefficient

Porsche Automobil  Great Wall

Good diversification

The 3 months correlation between Porsche and Great is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobil Holding 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 Porsche Automobil 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 Porsche Automobil Holding 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 Porsche Automobil i.e., Porsche Automobil and Great Wall go up and down completely randomly.

Pair Corralation between Porsche Automobil and Great Wall

Assuming the 90 days horizon Porsche Automobil Holding is expected to under-perform the Great Wall. But the pink sheet apears to be less risky and, when comparing its historical volatility, Porsche Automobil Holding is 2.02 times less risky than Great Wall. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Great Wall Motor is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,414  in Great Wall Motor on September 13, 2024 and sell it today you would earn a total of  426.00  from holding Great Wall Motor or generate 30.13% return on investment over 90 days.

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

Porsche Automobil Holding  vs.  Great Wall Motor

Porsche Automobil Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobil Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Great Wall Motor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Wall Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Great Wall showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Porsche Automobil and Great Wall

The main advantage of trading using opposite Porsche Automobil and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porsche Automobil 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 Porsche Automobil Holding 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.