Correlation Between China Communications and Alfa Financial
Can any of the company-specific risk be diversified away by investing in both China Communications and Alfa Financial 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 Alfa Financial 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 Alfa Financial Software, you can compare the effects of market volatilities on China Communications and Alfa Financial 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 Alfa Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Alfa Financial.
Diversification Opportunities for China Communications and Alfa Financial
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and Alfa is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Alfa Financial Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Financial Software 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 Alfa Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Financial Software has no effect on the direction of China Communications i.e., China Communications and Alfa Financial go up and down completely randomly.
Pair Corralation between China Communications and Alfa Financial
Assuming the 90 days horizon China Communications Services is expected to generate 3.44 times more return on investment than Alfa Financial. However, China Communications is 3.44 times more volatile than Alfa Financial Software. It trades about 0.08 of its potential returns per unit of risk. Alfa Financial Software is currently generating about 0.11 per unit of risk. If you would invest 19.00 in China Communications Services on September 4, 2024 and sell it today you would earn a total of 29.00 from holding China Communications Services or generate 152.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Alfa Financial Software
Performance |
| Timeline |
| China Communications |
| Alfa Financial Software |
China Communications and Alfa Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Alfa Financial
The main advantage of trading using opposite China Communications and Alfa Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Alfa Financial 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 Alfa Financial will offset losses from the drop in Alfa Financial's long position.| China Communications vs. National Beverage Corp | China Communications vs. Fevertree Drinks PLC | China Communications vs. THAI BEVERAGE | China Communications vs. ARDAGH METAL PACDL 0001 |
| Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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