Correlation Between Guangzhou Automobile and Vicinity

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

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

Diversification Opportunities for Guangzhou Automobile and Vicinity

-0.53

Correlation Coefficient

Guangzhou Automobile  Vicinity

Excellent diversification

The 3 months correlation between Guangzhou and Vicinity is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Vicinity Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Motor Corp and Guangzhou Automobile 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 Guangzhou Automobile Group are associated (or correlated) with Vicinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Motor Corp has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Vicinity go up and down completely randomly.

Pair Corralation between Guangzhou Automobile and Vicinity

Assuming the 90 days horizon Guangzhou Automobile Group is expected to generate 0.41 times more return on investment than Vicinity. However, Guangzhou Automobile Group is 2.44 times less risky than Vicinity. It trades about 0.1 of its potential returns per unit of risk. Vicinity Motor Corp is currently generating about -0.13 per unit of risk. If you would invest  32.00  in Guangzhou Automobile Group on September 15, 2024 and sell it today you would earn a total of  14.00  from holding Guangzhou Automobile Group or generate 43.75% return on investment over 90 days.

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

Guangzhou Automobile Group  vs.  Vicinity Motor Corp

Guangzhou Automobile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Guangzhou Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Vicinity Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vicinity Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Guangzhou Automobile and Vicinity

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

The idea behind Guangzhou Automobile Group and Vicinity Motor Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.