Correlation Between Peabody Energy and GEELY AUTOMOBILE

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

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

Diversification Opportunities for Peabody Energy and GEELY AUTOMOBILE

-0.31

Correlation Coefficient

Peabody Energy  GEELY AUTOMOBILE

Very good diversification

The 3 months correlation between Peabody and GEELY is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Peabody Energy and GEELY AUTOMOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEELY AUTOMOBILE and Peabody Energy 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 Peabody Energy are associated (or correlated) with GEELY AUTOMOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEELY AUTOMOBILE has no effect on the direction of Peabody Energy i.e., Peabody Energy and GEELY AUTOMOBILE go up and down completely randomly.

Pair Corralation between Peabody Energy and GEELY AUTOMOBILE

Assuming the 90 days horizon Peabody Energy is expected to under-perform the GEELY AUTOMOBILE. But the stock apears to be less risky and, when comparing its historical volatility, Peabody Energy is 1.48 times less risky than GEELY AUTOMOBILE. The stock trades about -0.12 of its potential returns per unit of risk. The GEELY AUTOMOBILE is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  135.00  in GEELY AUTOMOBILE on September 30, 2024 and sell it today you would earn a total of  49.00  from holding GEELY AUTOMOBILE or generate 36.3% return on investment over 90 days.

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

Peabody Energy  vs.  GEELY AUTOMOBILE

Peabody Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peabody Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

GEELY AUTOMOBILE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GEELY AUTOMOBILE are ranked lower than 11 (%) 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.

Pair Trading with Peabody Energy and GEELY AUTOMOBILE

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

The idea behind Peabody Energy and GEELY AUTOMOBILE 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.