Correlation Between Associated British and CHINA TELECOM
Can any of the company-specific risk be diversified away by investing in both Associated British and CHINA TELECOM 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 Associated British and CHINA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and CHINA TELECOM H , you can compare the effects of market volatilities on Associated British and CHINA TELECOM 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 Associated British with a short position of CHINA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and CHINA TELECOM.
Diversification Opportunities for Associated British and CHINA TELECOM
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and CHINA is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and CHINA TELECOM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA TELECOM H and Associated British 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 Associated British Foods are associated (or correlated) with CHINA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA TELECOM H has no effect on the direction of Associated British i.e., Associated British and CHINA TELECOM go up and down completely randomly.
Pair Corralation between Associated British and CHINA TELECOM
Assuming the 90 days trading horizon Associated British is expected to generate 4.36 times less return on investment than CHINA TELECOM. But when comparing it to its historical volatility, Associated British Foods is 2.41 times less risky than CHINA TELECOM. It trades about 0.06 of its potential returns per unit of risk. CHINA TELECOM H is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 10.00 in CHINA TELECOM H on September 20, 2024 and sell it today you would earn a total of 42.00 from holding CHINA TELECOM H or generate 420.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. CHINA TELECOM H
Performance |
| Timeline |
| Associated British Foods |
| CHINA TELECOM H |
Associated British and CHINA TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and CHINA TELECOM
The main advantage of trading using opposite Associated British and CHINA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British position performs unexpectedly, CHINA TELECOM 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 TELECOM will offset losses from the drop in CHINA TELECOM's long position.| Associated British vs. CyberArk Software | Associated British vs. EHEALTH | Associated British vs. YOOMA WELLNESS INC | Associated British vs. ATRYS HEALTH SA |
| CHINA TELECOM vs. Choice Hotels International | CHINA TELECOM vs. MELIA HOTELS | CHINA TELECOM vs. InterContinental Hotels Group | CHINA TELECOM vs. INTERCONT HOTELS |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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