Correlation Between China Communications and China Mobile
Can any of the company-specific risk be diversified away by investing in both China Communications and China Mobile 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 China Mobile 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 China Life Insurance, you can compare the effects of market volatilities on China Communications and China Mobile 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 China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and China Mobile.
Diversification Opportunities for China Communications and China Mobile
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and China is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of China Communications i.e., China Communications and China Mobile go up and down completely randomly.
Pair Corralation between China Communications and China Mobile
Assuming the 90 days horizon China Communications Services is expected to generate 1.46 times more return on investment than China Mobile. However, China Communications is 1.46 times more volatile than China Life Insurance. It trades about 0.09 of its potential returns per unit of risk. China Life Insurance is currently generating about 0.11 per unit of risk. If you would invest 18.00 in China Communications Services on September 14, 2024 and sell it today you would earn a total of 33.00 from holding China Communications Services or generate 183.33% 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. China Life Insurance
Performance |
| Timeline |
| China Communications |
| China Life Insurance |
China Communications and China Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and China Mobile
The main advantage of trading using opposite China Communications and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, China Mobile 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 China Mobile will offset losses from the drop in China Mobile'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 |
| China Mobile vs. SLR Investment Corp | China Mobile vs. JJ SNACK FOODS | China Mobile vs. THAI BEVERAGE | China Mobile vs. AOYAMA TRADING |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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