Correlation Between Guangzhou KingTeller and China Mobile

Can any of the company-specific risk be diversified away by investing in both Guangzhou KingTeller and China Mobile 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 Guangzhou KingTeller and China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangzhou KingTeller Technology and China Mobile Limited, you can compare the effects of market volatilities on Guangzhou KingTeller and China Mobile 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 Guangzhou KingTeller with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou KingTeller and China Mobile.

Diversification Opportunities for Guangzhou KingTeller and China Mobile

0.05

Correlation Coefficient

Guangzhou KingTeller  China Mobile

Significant diversification

The 3 months correlation between Guangzhou and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou KingTeller Technolog and China Mobile Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile Limited and Guangzhou KingTeller 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 Guangzhou KingTeller Technology are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile Limited has no effect on the direction of Guangzhou KingTeller i.e., Guangzhou KingTeller and China Mobile go up and down completely randomly.

Pair Corralation between Guangzhou KingTeller and China Mobile

Assuming the 90 days trading horizon Guangzhou KingTeller Technology is expected to generate 2.6 times more return on investment than China Mobile. However, Guangzhou KingTeller is 2.6 times more volatile than China Mobile Limited. It trades about -0.01 of its potential returns per unit of risk. China Mobile Limited is currently generating about -0.1 per unit of risk. If you would invest  475.00  in Guangzhou KingTeller Technology on December 26, 2024 and sell it today you would lose (26.00) from holding Guangzhou KingTeller Technology or give up 5.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Guangzhou KingTeller Technolog  vs.  China Mobile Limited

Guangzhou KingTeller

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guangzhou KingTeller Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangzhou KingTeller is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Mobile Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Mobile Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guangzhou KingTeller and China Mobile

The main advantage of trading using opposite Guangzhou KingTeller and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou KingTeller position performs unexpectedly, China Mobile 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 Mobile will offset losses from the drop in China Mobile's long position.

The idea behind Guangzhou KingTeller Technology and China Mobile Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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.