Correlation Between Seven West and China Communications
Can any of the company-specific risk be diversified away by investing in both Seven West and China Communications 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 Seven West and China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seven West Media and China Communications Services, you can compare the effects of market volatilities on Seven West and China Communications 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 Seven West with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and China Communications.
Diversification Opportunities for Seven West and China Communications
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Seven and China is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and Seven West 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 Seven West Media are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Seven West i.e., Seven West and China Communications go up and down completely randomly.
Pair Corralation between Seven West and China Communications
Assuming the 90 days horizon Seven West Media is expected to generate 4.82 times more return on investment than China Communications. However, Seven West is 4.82 times more volatile than China Communications Services. It trades about 0.09 of its potential returns per unit of risk. China Communications Services is currently generating about -0.07 per unit of risk. If you would invest 7.60 in Seven West Media on October 16, 2024 and sell it today you would earn a total of 0.50 from holding Seven West Media or generate 6.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seven West Media vs. China Communications Services
Performance |
| Timeline |
| Seven West Media |
| China Communications |
Seven West and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seven West and China Communications
The main advantage of trading using opposite Seven West and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| Seven West vs. Yanzhou Coal Mining | Seven West vs. Sch Environnement SA | Seven West vs. DONGJIANG ENVIRONMENTAL H | Seven West vs. ANGLO ASIAN MINING |
| China Communications vs. Zoom Video Communications | China Communications vs. UNIVERSAL MUSIC GROUP | China Communications vs. betterU Education Corp | China Communications vs. Rocket Internet SE |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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