Correlation Between China Communications and Nippon Telegraph
Can any of the company-specific risk be diversified away by investing in both China Communications and Nippon Telegraph 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 Nippon Telegraph 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 Nippon Telegraph and, you can compare the effects of market volatilities on China Communications and Nippon Telegraph 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 Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Nippon Telegraph.
Diversification Opportunities for China Communications and Nippon Telegraph
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Nippon is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Nippon Telegraph and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph 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 Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph has no effect on the direction of China Communications i.e., China Communications and Nippon Telegraph go up and down completely randomly.
Pair Corralation between China Communications and Nippon Telegraph
Assuming the 90 days horizon China Communications Services is expected to generate 3.77 times more return on investment than Nippon Telegraph. However, China Communications is 3.77 times more volatile than Nippon Telegraph and. It trades about 0.08 of its potential returns per unit of risk. Nippon Telegraph and is currently generating about 0.0 per unit of risk. If you would invest 8.17 in China Communications Services on August 29, 2024 and sell it today you would earn a total of 39.83 from holding China Communications Services or generate 487.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Nippon Telegraph and
Performance |
| Timeline |
| China Communications |
| Nippon Telegraph |
China Communications and Nippon Telegraph Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Nippon Telegraph
The main advantage of trading using opposite China Communications and Nippon Telegraph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Nippon Telegraph 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 Nippon Telegraph will offset losses from the drop in Nippon Telegraph's long position.| China Communications vs. Verizon Communications | China Communications vs. ATT Inc | China Communications vs. ATT Inc | China Communications vs. Deutsche Telekom AG |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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