Correlation Between Geely Automobile and INTER CARS

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

By analyzing existing cross correlation between Geely Automobile Holdings and INTER CARS SA, you can compare the effects of market volatilities on Geely Automobile and INTER CARS 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 Geely Automobile with a short position of INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and INTER CARS.

Diversification Opportunities for Geely Automobile and INTER CARS

-0.62

Correlation Coefficient

Geely Automobile  INTER CARS

Excellent diversification

The 3 months correlation between Geely and INTER is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA and Geely 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 Geely Automobile Holdings are associated (or correlated) with INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Geely Automobile i.e., Geely Automobile and INTER CARS go up and down completely randomly.

Pair Corralation between Geely Automobile and INTER CARS

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 2.12 times more return on investment than INTER CARS. However, Geely Automobile is 2.12 times more volatile than INTER CARS SA. It trades about 0.21 of its potential returns per unit of risk. INTER CARS SA is currently generating about -0.04 per unit of risk. If you would invest  102.00  in Geely Automobile Holdings on September 2, 2024 and sell it today you would earn a total of  65.00  from holding Geely Automobile Holdings or generate 63.73% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  INTER CARS SA

Geely Automobile Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Geely Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

INTER CARS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTER CARS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Geely Automobile and INTER CARS

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

The idea behind Geely Automobile Holdings and INTER CARS SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.