Correlation Between China Communications and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both China Communications and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials, you can compare the effects of market volatilities on China Communications and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and Vulcan Materials.
Diversification Opportunities for China Communications and Vulcan Materials
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between China and Vulcan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of China Communications i.e., China Communications and Vulcan Materials go up and down completely randomly.
Pair Corralation between China Communications and Vulcan Materials
Assuming the 90 days horizon China Communications Services is expected to generate 4.54 times more return on investment than Vulcan Materials. However, China Communications is 4.54 times more volatile than Vulcan Materials. It trades about 0.09 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.08 per unit of risk. If you would invest 23.00 in China Communications Services on September 3, 2024 and sell it today you would earn a total of 25.00 from holding China Communications Services or generate 108.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Communications Services vs. Vulcan Materials
Performance |
| Timeline |
| China Communications |
| Vulcan Materials |
China Communications and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Communications and Vulcan Materials
The main advantage of trading using opposite China Communications and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Communications position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| China Communications vs. T Mobile | China Communications vs. China Mobile Limited | China Communications vs. ATT Inc | China Communications vs. Nippon Telegraph and |
| Vulcan Materials vs. Chiba Bank | Vulcan Materials vs. ANTA SPORTS PRODUCT | Vulcan Materials vs. Fukuyama Transporting Co | Vulcan Materials vs. Tradegate AG Wertpapierhandelsbank |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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