Correlation Between Nissan and Geely Automobile

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

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

Diversification Opportunities for Nissan and Geely Automobile

0.38

Correlation Coefficient

Nissan  Geely Automobile

Weak diversification

The 3 months correlation between Nissan and Geely is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nissan Motor Co and Geely Automobile Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geely Automobile Holdings and Nissan 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 Nissan Motor Co 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 Holdings has no effect on the direction of Nissan i.e., Nissan and Geely Automobile go up and down completely randomly.

Pair Corralation between Nissan and Geely Automobile

Assuming the 90 days horizon Nissan Motor Co is expected to generate 0.71 times more return on investment than Geely Automobile. However, Nissan Motor Co is 1.4 times less risky than Geely Automobile. It trades about 0.05 of its potential returns per unit of risk. Geely Automobile Holdings is currently generating about -0.01 per unit of risk. If you would invest  737.00  in Nissan Motor Co on June 23, 2024 and sell it today you would earn a total of  131.00  from holding Nissan Motor Co or generate 17.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	43.0%
Values	Daily Returns

Nissan Motor Co  vs.  Geely Automobile Holdings

Nissan Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nissan is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Geely Automobile Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Geely Automobile Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Geely Automobile may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Pair Trading with Nissan and Geely Automobile

The main advantage of trading using opposite Nissan and Geely Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nissan 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 Nissan Motor Co and Geely Automobile Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.