Correlation Between Guangdong Jingyi and China Telecom

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

By analyzing existing cross correlation between Guangdong Jingyi Metal and China Telecom Corp, you can compare the effects of market volatilities on Guangdong Jingyi and China Telecom 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 Guangdong Jingyi with a short position of China Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Jingyi and China Telecom.

Diversification Opportunities for Guangdong Jingyi and China Telecom

0.51

Correlation Coefficient

Guangdong Jingyi  China Telecom

Very weak diversification

The 3 months correlation between Guangdong and China is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Jingyi Metal and China Telecom Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Telecom Corp and Guangdong Jingyi 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 Guangdong Jingyi Metal are associated (or correlated) with China Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Telecom Corp has no effect on the direction of Guangdong Jingyi i.e., Guangdong Jingyi and China Telecom go up and down completely randomly.

Pair Corralation between Guangdong Jingyi and China Telecom

Assuming the 90 days trading horizon Guangdong Jingyi Metal is expected to generate 0.95 times more return on investment than China Telecom. However, Guangdong Jingyi Metal is 1.05 times less risky than China Telecom. It trades about 0.15 of its potential returns per unit of risk. China Telecom Corp is currently generating about 0.05 per unit of risk. If you would invest  682.00  in Guangdong Jingyi Metal on December 26, 2024 and sell it today you would earn a total of  133.00  from holding Guangdong Jingyi Metal or generate 19.5% return on investment over 90 days.

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

Guangdong Jingyi Metal  vs.  China Telecom Corp

Guangdong Jingyi Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Jingyi Metal are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Jingyi sustained solid returns over the last few months and may actually be approaching a breakup point.

China Telecom Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Telecom Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Telecom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Guangdong Jingyi and China Telecom

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

The idea behind Guangdong Jingyi Metal and China Telecom Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.