Correlation Between China Communications and COMBA TELECOM
Can any of the company-specific risk be diversified away by investing in both China Communications and COMBA TELECOM 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 COMBA TELECOM 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 COMBA TELECOM SYST, you can compare the effects of market volatilities on China Communications and COMBA TELECOM 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 COMBA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and COMBA TELECOM.
Diversification Opportunities for China Communications and COMBA TELECOM
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between China and COMBA is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and COMBA TELECOM SYST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMBA TELECOM SYST 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 COMBA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMBA TELECOM SYST has no effect on the direction of China Communications i.e., China Communications and COMBA TELECOM go up and down completely randomly.
Pair Corralation between China Communications and COMBA TELECOM
Assuming the 90 days horizon China Communications Services is expected to generate 0.96 times more return on investment than COMBA TELECOM. However, China Communications Services is 1.04 times less risky than COMBA TELECOM. It trades about -0.11 of its potential returns per unit of risk. COMBA TELECOM SYST is currently generating about -0.21 per unit of risk. If you would invest 50.00 in China Communications Services on August 29, 2024 and sell it today you would lose (2.00) from holding China Communications Services or give up 4.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
China Communications Services vs. COMBA TELECOM SYST
Performance |
| Timeline |
| China Communications |
| COMBA TELECOM SYST |
China Communications and COMBA TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and COMBA TELECOM
The main advantage of trading using opposite China Communications and COMBA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, COMBA TELECOM 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 COMBA TELECOM will offset losses from the drop in COMBA TELECOM's long position.| China Communications vs. Verizon Communications | China Communications vs. ATT Inc | China Communications vs. ATT Inc | China Communications vs. Deutsche Telekom AG |
| COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Superior Plus Corp | COMBA TELECOM vs. SIVERS SEMICONDUCTORS 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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