Correlation Between China Communications and Platinum Investment
Can any of the company-specific risk be diversified away by investing in both China Communications and Platinum Investment 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 Platinum Investment 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 Platinum Investment Management, you can compare the effects of market volatilities on China Communications and Platinum Investment 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 Platinum Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Platinum Investment.
Diversification Opportunities for China Communications and Platinum Investment
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and Platinum is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Platinum Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Platinum Investment 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 Platinum Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Platinum Investment has no effect on the direction of China Communications i.e., China Communications and Platinum Investment go up and down completely randomly.
Pair Corralation between China Communications and Platinum Investment
Assuming the 90 days horizon China Communications Services is expected to generate 1.07 times more return on investment than Platinum Investment. However, China Communications is 1.07 times more volatile than Platinum Investment Management. It trades about -0.06 of its potential returns per unit of risk. Platinum Investment Management is currently generating about -0.42 per unit of risk. If you would invest 49.00 in China Communications Services on August 30, 2024 and sell it today you would lose (1.00) from holding China Communications Services or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Platinum Investment Management
Performance |
| Timeline |
| China Communications |
| Platinum Investment |
China Communications and Platinum Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Platinum Investment
The main advantage of trading using opposite China Communications and Platinum Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Platinum Investment 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 Platinum Investment will offset losses from the drop in Platinum Investment's long position.| China Communications vs. Verizon Communications | China Communications vs. ATT Inc | China Communications vs. ATT Inc | China Communications vs. Deutsche Telekom AG |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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