Correlation Between GEELY AUTOMOBILE and TripAdvisor

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

By analyzing existing cross correlation between GEELY AUTOMOBILE and TripAdvisor, you can compare the effects of market volatilities on GEELY AUTOMOBILE and TripAdvisor 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 TripAdvisor. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEELY AUTOMOBILE and TripAdvisor.

Diversification Opportunities for GEELY AUTOMOBILE and TripAdvisor

0.63

Correlation Coefficient

GEELY AUTOMOBILE  TripAdvisor

Poor diversification

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

Pair Corralation between GEELY AUTOMOBILE and TripAdvisor

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 0.93 times more return on investment than TripAdvisor. However, GEELY AUTOMOBILE is 1.08 times less risky than TripAdvisor. It trades about 0.14 of its potential returns per unit of risk. TripAdvisor is currently generating about -0.02 per unit of risk. If you would invest  75.00  in GEELY AUTOMOBILE on September 14, 2024 and sell it today you would earn a total of  120.00  from holding GEELY AUTOMOBILE or generate 160.0% return on investment over 90 days.

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

GEELY AUTOMOBILE  vs.  TripAdvisor

GEELY AUTOMOBILE

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GEELY AUTOMOBILE unveiled solid returns over the last few months and may actually be approaching a breakup point.

TripAdvisor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TripAdvisor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TripAdvisor may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GEELY AUTOMOBILE and TripAdvisor

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

The idea behind GEELY AUTOMOBILE and TripAdvisor 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.