Correlation Between CHINA TELECOM and Koninklijke Philips
Can any of the company-specific risk be diversified away by investing in both CHINA TELECOM and Koninklijke Philips 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 TELECOM and Koninklijke Philips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA TELECOM H and Koninklijke Philips NV, you can compare the effects of market volatilities on CHINA TELECOM and Koninklijke Philips 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 TELECOM with a short position of Koninklijke Philips. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and Koninklijke Philips.
Diversification Opportunities for CHINA TELECOM and Koninklijke Philips
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CHINA and Koninklijke is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips and CHINA TELECOM 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 TELECOM H are associated (or correlated) with Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and Koninklijke Philips go up and down completely randomly.
Pair Corralation between CHINA TELECOM and Koninklijke Philips
Assuming the 90 days trading horizon CHINA TELECOM H is expected to generate 1.6 times more return on investment than Koninklijke Philips. However, CHINA TELECOM is 1.6 times more volatile than Koninklijke Philips NV. It trades about 0.1 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.07 per unit of risk. If you would invest 10.00 in CHINA TELECOM H on September 12, 2024 and sell it today you would earn a total of 42.00 from holding CHINA TELECOM H or generate 420.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA TELECOM H vs. Koninklijke Philips NV
Performance |
| Timeline |
| CHINA TELECOM H |
| Koninklijke Philips |
CHINA TELECOM and Koninklijke Philips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA TELECOM and Koninklijke Philips
The main advantage of trading using opposite CHINA TELECOM and Koninklijke Philips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA TELECOM position performs unexpectedly, Koninklijke Philips 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 Koninklijke Philips will offset losses from the drop in Koninklijke Philips' long position.| CHINA TELECOM vs. Apple Inc | CHINA TELECOM vs. Apple Inc | CHINA TELECOM vs. Apple Inc | CHINA TELECOM vs. Apple Inc |
| Koninklijke Philips vs. Ribbon Communications | Koninklijke Philips vs. Cogent Communications Holdings | Koninklijke Philips vs. Spirent Communications plc | Koninklijke Philips vs. CHINA TELECOM H |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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