Correlation Between China Communications and DATANG INTL
Can any of the company-specific risk be diversified away by investing in both China Communications and DATANG INTL 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 DATANG INTL 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 DATANG INTL POW, you can compare the effects of market volatilities on China Communications and DATANG INTL 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 DATANG INTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and DATANG INTL.
Diversification Opportunities for China Communications and DATANG INTL
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and DATANG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and DATANG INTL POW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATANG INTL POW 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 DATANG INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATANG INTL POW has no effect on the direction of China Communications i.e., China Communications and DATANG INTL go up and down completely randomly.
Pair Corralation between China Communications and DATANG INTL
Assuming the 90 days horizon China Communications Services is expected to generate 1.6 times more return on investment than DATANG INTL. However, China Communications is 1.6 times more volatile than DATANG INTL POW. It trades about 0.06 of its potential returns per unit of risk. DATANG INTL POW is currently generating about 0.02 per unit of risk. If you would invest 21.00 in China Communications Services on August 26, 2024 and sell it today you would earn a total of 28.00 from holding China Communications Services or generate 133.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. DATANG INTL POW
Performance |
| Timeline |
| China Communications |
| DATANG INTL POW |
China Communications and DATANG INTL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and DATANG INTL
The main advantage of trading using opposite China Communications and DATANG INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, DATANG INTL 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 DATANG INTL will offset losses from the drop in DATANG INTL's long position.| China Communications vs. T Mobile | China Communications vs. ATT Inc | China Communications vs. Deutsche Telekom AG | China Communications vs. Nippon Telegraph and |
| DATANG INTL vs. Apple Inc | DATANG INTL vs. Apple Inc | DATANG INTL vs. Apple Inc | DATANG INTL 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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