Correlation Between Geely Automobile and AviChina Industry

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

Diversification Opportunities for Geely Automobile and AviChina Industry

0.69

Correlation Coefficient

Geely Automobile  AviChina Industry

Poor diversification

The 3 months correlation between Geely and AviChina is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and AviChina Industry Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AviChina Industry 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 AviChina Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AviChina Industry has no effect on the direction of Geely Automobile i.e., Geely Automobile and AviChina Industry go up and down completely randomly.

Pair Corralation between Geely Automobile and AviChina Industry

Assuming the 90 days horizon Geely Automobile Holdings is expected to generate 0.97 times more return on investment than AviChina Industry. However, Geely Automobile Holdings is 1.03 times less risky than AviChina Industry. It trades about 0.15 of its potential returns per unit of risk. AviChina Industry Technology is currently generating about 0.12 per unit of risk. If you would invest  156.00  in Geely Automobile Holdings on April 24, 2025 and sell it today you would earn a total of  47.00  from holding Geely Automobile Holdings or generate 30.13% 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.  AviChina Industry Technology

Geely Automobile Holdings

Risk-Adjusted Performance

Good

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

AviChina Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AviChina Industry Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AviChina Industry reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and AviChina Industry

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

The idea behind Geely Automobile Holdings and AviChina Industry Technology 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.