Correlation Between China Communications and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both China Communications and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on China Communications and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Chongqing Machinery.
Diversification Opportunities for China Communications and Chongqing Machinery
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between China and Chongqing is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of China Communications i.e., China Communications and Chongqing Machinery go up and down completely randomly.
Pair Corralation between China Communications and Chongqing Machinery
Assuming the 90 days horizon China Communications Services is expected to generate 1.57 times more return on investment than Chongqing Machinery. However, China Communications is 1.57 times more volatile than Chongqing Machinery Electric. It trades about 0.08 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.04 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 | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Chongqing Machinery Electric
Performance |
| Timeline |
| China Communications |
| Chongqing Machinery |
China Communications and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Chongqing Machinery
The main advantage of trading using opposite China Communications and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery'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 |
| Chongqing Machinery vs. Schneider Electric SE | Chongqing Machinery vs. Eaton PLC | Chongqing Machinery vs. ABB | Chongqing Machinery vs. 3M Company |
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 CEOs Directory module to screen CEOs from public companies around the world.
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