Correlation Between De Licacy and China Mobile
Can any of the company-specific risk be diversified away by investing in both De Licacy and China Mobile 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 De Licacy and China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between De Licacy Industrial and China Mobile, you can compare the effects of market volatilities on De Licacy and China Mobile 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 De Licacy with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Licacy and China Mobile.
Diversification Opportunities for De Licacy and China Mobile
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 1464 and China is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding De Licacy Industrial and China Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile and De Licacy 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 De Licacy Industrial are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile has no effect on the direction of De Licacy i.e., De Licacy and China Mobile go up and down completely randomly.
Pair Corralation between De Licacy and China Mobile
Assuming the 90 days trading horizon De Licacy is expected to generate 2.92 times less return on investment than China Mobile. In addition to that, De Licacy is 1.01 times more volatile than China Mobile. It trades about 0.07 of its total potential returns per unit of risk. China Mobile is currently generating about 0.21 per unit of volatility. If you would invest 1,336 in China Mobile on November 7, 2024 and sell it today you would earn a total of 67.00 from holding China Mobile or generate 5.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
De Licacy Industrial vs. China Mobile
Performance |
| Timeline |
| De Licacy Industrial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
| China Mobile |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
De Licacy and China Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with De Licacy and China Mobile
The main advantage of trading using opposite De Licacy and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Licacy position performs unexpectedly, China Mobile 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 China Mobile will offset losses from the drop in China Mobile's long position.The idea behind De Licacy Industrial and China Mobile 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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