Correlation Between Eastern Communications and China Baoan
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By analyzing existing cross correlation between Eastern Communications Co and China Baoan Group, you can compare the effects of market volatilities on Eastern Communications and China Baoan 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 Eastern Communications with a short position of China Baoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Communications and China Baoan.
Diversification Opportunities for Eastern Communications and China Baoan
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eastern and China is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Communications Co and China Baoan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Baoan Group and Eastern Communications 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 Eastern Communications Co are associated (or correlated) with China Baoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Baoan Group has no effect on the direction of Eastern Communications i.e., Eastern Communications and China Baoan go up and down completely randomly.
Pair Corralation between Eastern Communications and China Baoan
Assuming the 90 days trading horizon Eastern Communications Co is expected to generate 1.74 times more return on investment than China Baoan. However, Eastern Communications is 1.74 times more volatile than China Baoan Group. It trades about 0.01 of its potential returns per unit of risk. China Baoan Group is currently generating about -0.4 per unit of risk. If you would invest 40.00 in Eastern Communications Co on November 1, 2024 and sell it today you would earn a total of 0.00 from holding Eastern Communications Co or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eastern Communications Co vs. China Baoan Group
Performance |
| Timeline |
| Eastern Communications |
| China Baoan Group |
Eastern Communications and China Baoan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern Communications and China Baoan
The main advantage of trading using opposite Eastern Communications and China Baoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern Communications position performs unexpectedly, China Baoan 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 Baoan will offset losses from the drop in China Baoan's long position.The idea behind Eastern Communications Co and China Baoan Group 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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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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