Correlation Between China Sports and CICT Mobile

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Can any of the company-specific risk be diversified away by investing in both China Sports and CICT 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 China Sports and CICT Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Sports Industry and CICT Mobile Communication, you can compare the effects of market volatilities on China Sports and CICT 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 China Sports with a short position of CICT Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Sports and CICT Mobile.

Diversification Opportunities for China Sports and CICT Mobile

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between China and CICT is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding China Sports Industry and CICT Mobile Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CICT Mobile Communication and China Sports 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 China Sports Industry are associated (or correlated) with CICT Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CICT Mobile Communication has no effect on the direction of China Sports i.e., China Sports and CICT Mobile go up and down completely randomly.

Pair Corralation between China Sports and CICT Mobile

Assuming the 90 days trading horizon China Sports Industry is expected to generate 0.59 times more return on investment than CICT Mobile. However, China Sports Industry is 1.69 times less risky than CICT Mobile. It trades about 0.1 of its potential returns per unit of risk. CICT Mobile Communication is currently generating about 0.05 per unit of risk. If you would invest  811.00  in China Sports Industry on September 5, 2024 and sell it today you would earn a total of  31.00  from holding China Sports Industry or generate 3.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

China Sports Industry  vs.  CICT Mobile Communication

 Performance 
       Timeline  
China Sports Industry 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in China Sports Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Sports sustained solid returns over the last few months and may actually be approaching a breakup point.
CICT Mobile Communication 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CICT Mobile Communication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICT Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

China Sports and CICT Mobile Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Sports and CICT Mobile

The main advantage of trading using opposite China Sports and CICT Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Sports position performs unexpectedly, CICT 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 CICT Mobile will offset losses from the drop in CICT Mobile's long position.
The idea behind China Sports Industry and CICT Mobile Communication 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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