Correlation Between Suzuki and Great Wall

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

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

Diversification Opportunities for Suzuki and Great Wall

-0.19

Correlation Coefficient

Suzuki  Great Wall

Good diversification

The 3 months correlation between Suzuki and Great is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Suzuki 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 Suzuki 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 Suzuki 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 Suzuki i.e., Suzuki and Great Wall go up and down completely randomly.

Pair Corralation between Suzuki and Great Wall

Assuming the 90 days horizon Suzuki is expected to generate 1.23 times less return on investment than Great Wall. But when comparing it to its historical volatility, Suzuki Motor Corp is 2.0 times less risky than Great Wall. It trades about 0.11 of its potential returns per unit of risk. Great Wall Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,799  in Great Wall Motor on December 20, 2024 and sell it today you would earn a total of  221.00  from holding Great Wall Motor or generate 12.28% return on investment over 90 days.

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

Suzuki Motor Corp  vs.  Great Wall Motor

Suzuki Motor Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Suzuki Motor Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Suzuki showed 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 Suzuki and Great Wall

The main advantage of trading using opposite Suzuki and Great Wall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suzuki 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 Suzuki 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.