Correlation Between Geely Automobile and Tesla

Can any of the company-specific risk be diversified away by investing in both Geely Automobile and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on Geely Automobile and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and Tesla.

Diversification Opportunities for Geely Automobile and Tesla

0.63

Correlation Coefficient

Geely Automobile  Tesla

Poor diversification

The 3 months correlation between Geely and Tesla is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Geely Automobile i.e., Geely Automobile and Tesla go up and down completely randomly.

Pair Corralation between Geely Automobile and Tesla

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 0.93 times more return on investment than Tesla. However, Geely Automobile Holdings is 1.08 times less risky than Tesla. It trades about 0.25 of its potential returns per unit of risk. Tesla Inc is currently generating about 0.22 per unit of risk. If you would invest  104.00  in Geely Automobile Holdings on September 12, 2024 and sell it today you would earn a total of  89.00  from holding Geely Automobile Holdings or generate 85.58% return on investment over 90 days.

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

Geely Automobile Holdings  vs.  Tesla Inc

Geely Automobile Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 19 (%) 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.

Tesla Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tesla reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and Tesla

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

The idea behind Geely Automobile Holdings and Tesla Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.