Correlation Between Vicinity and Guangzhou Automobile

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

By analyzing existing cross correlation between Vicinity Motor Corp and Guangzhou Automobile Group, you can compare the effects of market volatilities on Vicinity and Guangzhou 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 Vicinity with a short position of Guangzhou Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vicinity and Guangzhou Automobile.

Diversification Opportunities for Vicinity and Guangzhou Automobile

-0.53

Correlation Coefficient

Vicinity  Guangzhou Automobile

Excellent diversification

The 3 months correlation between Vicinity and Guangzhou is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vicinity Motor Corp and Guangzhou Automobile Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Automobile and Vicinity 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 Vicinity Motor Corp are associated (or correlated) with Guangzhou Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Automobile has no effect on the direction of Vicinity i.e., Vicinity and Guangzhou Automobile go up and down completely randomly.

Pair Corralation between Vicinity and Guangzhou Automobile

Considering the 90-day investment horizon Vicinity Motor Corp is expected to under-perform the Guangzhou Automobile. In addition to that, Vicinity is 2.44 times more volatile than Guangzhou Automobile Group. It trades about -0.13 of its total potential returns per unit of risk. Guangzhou Automobile Group is currently generating about 0.1 per unit of volatility. If you would invest  32.00  in Guangzhou Automobile Group on September 16, 2024 and sell it today you would earn a total of  14.00  from holding Guangzhou Automobile Group or generate 43.75% return on investment over 90 days.

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

Vicinity Motor Corp  vs.  Guangzhou Automobile Group

Vicinity Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vicinity Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Guangzhou Automobile

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Automobile Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vicinity and Guangzhou Automobile

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

The idea behind Vicinity Motor Corp and Guangzhou Automobile Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.