Correlation Between China Rare and ATT
Can any of the company-specific risk be diversified away by investing in both China Rare and ATT 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 Rare and ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Rare Earth and ATT Inc, you can compare the effects of market volatilities on China Rare and ATT 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 Rare with a short position of ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Rare and ATT.
Diversification Opportunities for China Rare and ATT
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between China and ATT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Rare Earth and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc and China Rare 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 Rare Earth are associated (or correlated) with ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of China Rare i.e., China Rare and ATT go up and down completely randomly.
Pair Corralation between China Rare and ATT
Assuming the 90 days horizon China Rare Earth is expected to generate 24.25 times more return on investment than ATT. However, China Rare is 24.25 times more volatile than ATT Inc. It trades about 0.12 of its potential returns per unit of risk. ATT Inc is currently generating about 0.18 per unit of risk. If you would invest 3.00 in China Rare Earth on September 3, 2024 and sell it today you would earn a total of 3.00 from holding China Rare Earth or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
China Rare Earth vs. ATT Inc
Performance |
| Timeline |
| China Rare Earth |
| ATT Inc |
China Rare and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Rare and ATT
The main advantage of trading using opposite China Rare and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Rare position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| China Rare vs. Qubec Nickel Corp | China Rare vs. IGO Limited | China Rare vs. Avarone Metals | China Rare vs. Adriatic Metals PLC |
| ATT vs. Highway Holdings Limited | ATT vs. QCR Holdings | ATT vs. Partner Communications | ATT vs. Acumen Pharmaceuticals |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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