Correlation Between China Mobile and Volkswagen
Can any of the company-specific risk be diversified away by investing in both China Mobile and Volkswagen 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 Mobile and Volkswagen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Life Insurance and Volkswagen AG, you can compare the effects of market volatilities on China Mobile and Volkswagen 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 Mobile with a short position of Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mobile and Volkswagen.
Diversification Opportunities for China Mobile and Volkswagen
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Volkswagen is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding China Life Insurance and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG and China Mobile 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 Life Insurance are associated (or correlated) with Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of China Mobile i.e., China Mobile and Volkswagen go up and down completely randomly.
Pair Corralation between China Mobile and Volkswagen
Assuming the 90 days horizon China Life Insurance is expected to generate 2.5 times more return on investment than Volkswagen. However, China Mobile is 2.5 times more volatile than Volkswagen AG. It trades about 0.1 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.15 per unit of risk. If you would invest 171.00 in China Life Insurance on September 12, 2024 and sell it today you would earn a total of 23.00 from holding China Life Insurance or generate 13.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Life Insurance vs. Volkswagen AG
Performance |
| Timeline |
| China Life Insurance |
| Volkswagen AG |
China Mobile and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Mobile and Volkswagen
The main advantage of trading using opposite China Mobile and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.| China Mobile vs. Jacquet Metal Service | China Mobile vs. Texas Roadhouse | China Mobile vs. Perseus Mining Limited | China Mobile vs. Evolution Mining Limited |
| Volkswagen vs. Fukuyama Transporting Co | Volkswagen vs. PT Global Mediacom | Volkswagen vs. PLAYTIKA HOLDING DL 01 | Volkswagen vs. Prosiebensat 1 Media |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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