Correlation Between Geely Automobile and TRAVEL +

Can any of the company-specific risk be diversified away by investing in both Geely Automobile and TRAVEL + 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 TRAVEL + 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 TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Geely Automobile and TRAVEL + 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 TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Geely Automobile and TRAVEL +.

Diversification Opportunities for Geely Automobile and TRAVEL +

0.76

Correlation Coefficient

Geely Automobile  TRAVEL +

Poor diversification

The 3 months correlation between Geely and TRAVEL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Geely Automobile i.e., Geely Automobile and TRAVEL + go up and down completely randomly.

Pair Corralation between Geely Automobile and TRAVEL +

Assuming the 90 days horizon Geely Automobile is expected to generate 4.53 times less return on investment than TRAVEL +. In addition to that, Geely Automobile is 1.81 times more volatile than TRAVEL LEISURE DL 01. It trades about 0.06 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about 0.47 per unit of volatility. If you would invest  4,420  in TRAVEL LEISURE DL 01 on September 5, 2024 and sell it today you would earn a total of  830.00  from holding TRAVEL LEISURE DL 01 or generate 18.78% 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.  TRAVEL LEISURE DL 01

Geely Automobile Holdings

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 17 (%) 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.

TRAVEL LEISURE DL

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and TRAVEL +

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

The idea behind Geely Automobile Holdings and TRAVEL LEISURE DL 01 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.