Correlation Between China Communications and National Beverage
Can any of the company-specific risk be diversified away by investing in both China Communications and National Beverage 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 Communications and National Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Communications Services and National Beverage Corp, you can compare the effects of market volatilities on China Communications and National Beverage 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 Communications with a short position of National Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and National Beverage.
Diversification Opportunities for China Communications and National Beverage
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and National is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and National Beverage Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Beverage Corp and China 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 China Communications Services are associated (or correlated) with National Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Beverage Corp has no effect on the direction of China Communications i.e., China Communications and National Beverage go up and down completely randomly.
Pair Corralation between China Communications and National Beverage
Assuming the 90 days horizon China Communications Services is expected to generate 4.36 times more return on investment than National Beverage. However, China Communications is 4.36 times more volatile than National Beverage Corp. It trades about 0.09 of its potential returns per unit of risk. National Beverage Corp is currently generating about 0.07 per unit of risk. If you would invest 24.00 in China Communications Services on September 5, 2024 and sell it today you would earn a total of 25.00 from holding China Communications Services or generate 104.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
China Communications Services vs. National Beverage Corp
Performance |
| Timeline |
| China Communications |
| National Beverage Corp |
China Communications and National Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and National Beverage
The main advantage of trading using opposite China Communications and National Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, National Beverage 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 National Beverage will offset losses from the drop in National Beverage's long position.| China Communications vs. Nufarm Limited | China Communications vs. Granite Construction | China Communications vs. X FAB Silicon Foundries | China Communications vs. Hitachi Construction Machinery |
| National Beverage vs. SPORT LISBOA E | National Beverage vs. Japan Asia Investment | National Beverage vs. Columbia Sportswear | National Beverage vs. SLR Investment Corp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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