Correlation Between Apple and CHINA TELECOM
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and CHINA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and CHINA TELECOM H , you can compare the effects of market volatilities on Apple 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 Apple with a short position of CHINA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and CHINA TELECOM.
Diversification Opportunities for Apple and CHINA TELECOM
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Apple and CHINA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and CHINA TELECOM go up and down completely randomly.
Pair Corralation between Apple and CHINA TELECOM
Assuming the 90 days trading horizon Apple is expected to generate 3.55 times less return on investment than CHINA TELECOM. But when comparing it to its historical volatility, Apple Inc is 2.95 times less risky than CHINA TELECOM. It trades about 0.09 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 15.00 in CHINA TELECOM H on September 12, 2024 and sell it today you would earn a total of 37.00 from holding CHINA TELECOM H or generate 246.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Apple Inc vs. CHINA TELECOM H
Performance |
| Timeline |
| Apple Inc |
| CHINA TELECOM H |
Apple and CHINA TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and CHINA TELECOM
The main advantage of trading using opposite Apple and CHINA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. ON SEMICONDUCTOR | Apple vs. Burlington Stores | Apple vs. National Retail Properties | Apple vs. Goosehead Insurance |
| CHINA TELECOM vs. Apple Inc | CHINA TELECOM vs. Apple Inc | CHINA TELECOM vs. Apple Inc | CHINA TELECOM vs. Apple Inc |
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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