Correlation Between Consolidated Communications and China Railway
Can any of the company-specific risk be diversified away by investing in both Consolidated Communications and China Railway 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 Consolidated Communications and China Railway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Communications Holdings and China Railway Construction, you can compare the effects of market volatilities on Consolidated Communications and China Railway 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 Consolidated Communications with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and China Railway.
Diversification Opportunities for Consolidated Communications and China Railway
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Consolidated and China is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and China Railway Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Constr and Consolidated 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 Consolidated Communications Holdings are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Constr has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and China Railway go up and down completely randomly.
Pair Corralation between Consolidated Communications and China Railway
Assuming the 90 days horizon Consolidated Communications is expected to generate 1.84 times less return on investment than China Railway. But when comparing it to its historical volatility, Consolidated Communications Holdings is 4.56 times less risky than China Railway. It trades about 0.19 of its potential returns per unit of risk. China Railway Construction is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 56.00 in China Railway Construction on August 29, 2024 and sell it today you would earn a total of 8.00 from holding China Railway Construction or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Consolidated Communications Ho vs. China Railway Construction
Performance |
| Timeline |
| Consolidated Communications |
| China Railway Constr |
Consolidated Communications and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Communications and China Railway
The main advantage of trading using opposite Consolidated Communications and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications position performs unexpectedly, China Railway 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 Railway will offset losses from the drop in China Railway's long position.| Consolidated Communications vs. Verizon Communications | Consolidated Communications vs. ATT Inc | Consolidated Communications vs. ATT Inc | Consolidated Communications vs. Deutsche Telekom AG |
| China Railway vs. Infrastrutture Wireless Italiane | China Railway vs. Transport International Holdings | China Railway vs. NTG Nordic Transport | China Railway vs. DICKS Sporting Goods |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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