Correlation Between Guangdong Shenglu and CICT Mobile

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

By analyzing existing cross correlation between Guangdong Shenglu Telecommunication and CICT Mobile Communication, you can compare the effects of market volatilities on Guangdong Shenglu and CICT 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 Guangdong Shenglu with a short position of CICT Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Shenglu and CICT Mobile.

Diversification Opportunities for Guangdong Shenglu and CICT Mobile

0.94

Correlation Coefficient

Guangdong Shenglu  CICT Mobile

Almost no diversification

The 3 months correlation between Guangdong and CICT is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Shenglu Telecommunic and CICT Mobile Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CICT Mobile Communication and Guangdong Shenglu 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 Shenglu Telecommunication are associated (or correlated) with CICT Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CICT Mobile Communication has no effect on the direction of Guangdong Shenglu i.e., Guangdong Shenglu and CICT Mobile go up and down completely randomly.

Pair Corralation between Guangdong Shenglu and CICT Mobile

Assuming the 90 days trading horizon Guangdong Shenglu Telecommunication is expected to generate 1.0 times more return on investment than CICT Mobile. However, Guangdong Shenglu is 1.0 times more volatile than CICT Mobile Communication. It trades about 0.18 of its potential returns per unit of risk. CICT Mobile Communication is currently generating about 0.14 per unit of risk. If you would invest  542.00  in Guangdong Shenglu Telecommunication on September 4, 2024 and sell it today you would earn a total of  201.00  from holding Guangdong Shenglu Telecommunication or generate 37.08% return on investment over 90 days.

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

Guangdong Shenglu Telecommunic  vs.  CICT Mobile Communication

Guangdong Shenglu

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Shenglu Telecommunication are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Shenglu sustained solid returns over the last few months and may actually be approaching a breakup point.

CICT Mobile Communication

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CICT Mobile Communication are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CICT Mobile sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guangdong Shenglu and CICT Mobile

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

The idea behind Guangdong Shenglu Telecommunication and CICT Mobile Communication 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.