Correlation Between China Communications and Sea
Can any of the company-specific risk be diversified away by investing in both China Communications and Sea 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 Sea 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 Sea Limited, you can compare the effects of market volatilities on China Communications and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Sea.
Diversification Opportunities for China Communications and Sea
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Sea is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Sea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea Limited 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea Limited has no effect on the direction of China Communications i.e., China Communications and Sea go up and down completely randomly.
Pair Corralation between China Communications and Sea
Assuming the 90 days horizon China Communications is expected to generate 1.51 times less return on investment than Sea. But when comparing it to its historical volatility, China Communications Services is 1.53 times less risky than Sea. It trades about 0.28 of its potential returns per unit of risk. Sea Limited is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 9,820 in Sea Limited on September 15, 2024 and sell it today you would earn a total of 1,240 from holding Sea Limited or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Sea Limited
Performance |
| Timeline |
| China Communications |
| Sea Limited |
China Communications and Sea Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Sea
The main advantage of trading using opposite China Communications and Sea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Sea 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 Sea will offset losses from the drop in Sea's long position.| China Communications vs. Superior Plus Corp | China Communications vs. SIVERS SEMICONDUCTORS AB | China Communications vs. Norsk Hydro ASA | China Communications vs. Reliance Steel Aluminum |
| Sea vs. ANTA SPORTS PRODUCT | Sea vs. DICKS Sporting Goods | Sea vs. China Communications Services | Sea vs. USWE SPORTS AB |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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