Correlation Between SUNSEA Telecommunicatio and China Railway

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

By analyzing existing cross correlation between SUNSEA Telecommunications Co and China Railway Tielong, you can compare the effects of market volatilities on SUNSEA Telecommunicatio and China Railway 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 SUNSEA Telecommunicatio with a short position of China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of SUNSEA Telecommunicatio and China Railway.

Diversification Opportunities for SUNSEA Telecommunicatio and China Railway

-0.11

Correlation Coefficient

SUNSEA Telecommunicatio  China Railway

Good diversification

The 3 months correlation between SUNSEA and China is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding SUNSEA Telecommunications Co and China Railway Tielong in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Tielong and SUNSEA Telecommunicatio 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 SUNSEA Telecommunications Co are associated (or correlated) with China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Tielong has no effect on the direction of SUNSEA Telecommunicatio i.e., SUNSEA Telecommunicatio and China Railway go up and down completely randomly.

Pair Corralation between SUNSEA Telecommunicatio and China Railway

Assuming the 90 days trading horizon SUNSEA Telecommunications Co is expected to generate 4.51 times more return on investment than China Railway. However, SUNSEA Telecommunicatio is 4.51 times more volatile than China Railway Tielong. It trades about 0.09 of its potential returns per unit of risk. China Railway Tielong is currently generating about -0.06 per unit of risk. If you would invest  816.00  in SUNSEA Telecommunications Co on December 25, 2024 and sell it today you would earn a total of  182.00  from holding SUNSEA Telecommunications Co or generate 22.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

SUNSEA Telecommunications Co  vs.  China Railway Tielong

SUNSEA Telecommunicatio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SUNSEA Telecommunications Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SUNSEA Telecommunicatio sustained solid returns over the last few months and may actually be approaching a breakup point.

China Railway Tielong

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SUNSEA Telecommunicatio and China Railway

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

The idea behind SUNSEA Telecommunications Co and China Railway Tielong 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.