Correlation Between China Mobile and New Era

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

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

Diversification Opportunities for China Mobile and New Era

0.37

Correlation Coefficient

China Mobile  New Era

Weak diversification

The 3 months correlation between China and New is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile and New Era Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Electronics and China Mobile 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 Mobile are associated (or correlated) with New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Electronics has no effect on the direction of China Mobile i.e., China Mobile and New Era go up and down completely randomly.

Pair Corralation between China Mobile and New Era

Assuming the 90 days trading horizon China Mobile is expected to generate 0.3 times more return on investment than New Era. However, China Mobile is 3.3 times less risky than New Era. It trades about 0.01 of its potential returns per unit of risk. New Era Electronics is currently generating about -0.18 per unit of risk. If you would invest  1,399  in China Mobile on October 22, 2024 and sell it today you would earn a total of  9.00  from holding China Mobile or generate 0.64% return on investment over 90 days.

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

China Mobile  vs.  New Era Electronics

China Mobile

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, China Mobile is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

New Era Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with China Mobile and New Era

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

The idea behind China Mobile and New Era Electronics 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 Anywhere module to track or share privately all of your investments from the convenience of any device.