Correlation Between Geely Automobile and FirstGroup Plc

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

Diversification Opportunities for Geely Automobile and FirstGroup Plc

0.61

Correlation Coefficient

Geely Automobile  FirstGroup Plc

Poor diversification

The 3 months correlation between Geely and FirstGroup is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Geely Automobile Holdings and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc 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 FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of Geely Automobile i.e., Geely Automobile and FirstGroup Plc go up and down completely randomly.

Pair Corralation between Geely Automobile and FirstGroup Plc

Assuming the 90 days horizon Geely Automobile is expected to generate 1.03 times less return on investment than FirstGroup Plc. In addition to that, Geely Automobile is 1.51 times more volatile than FirstGroup plc. It trades about 0.15 of its total potential returns per unit of risk. FirstGroup plc is currently generating about 0.23 per unit of volatility. If you would invest  189.00  in FirstGroup plc on April 23, 2025 and sell it today you would earn a total of  64.00  from holding FirstGroup plc or generate 33.86% 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.  FirstGroup plc

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.

FirstGroup plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstGroup plc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FirstGroup Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Geely Automobile and FirstGroup Plc

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

The idea behind Geely Automobile Holdings and FirstGroup plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.