Correlation Between K Way and China Mobile

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

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

Diversification Opportunities for K Way and China Mobile

0.1

Correlation Coefficient

K Way  China Mobile

Average diversification

The 3 months correlation between 5201 and China is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding K Way Information and China Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile and K Way 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 K Way Information 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 has no effect on the direction of K Way i.e., K Way and China Mobile go up and down completely randomly.

Pair Corralation between K Way and China Mobile

Assuming the 90 days trading horizon K Way Information is expected to generate 2.24 times more return on investment than China Mobile. However, K Way is 2.24 times more volatile than China Mobile. It trades about 0.24 of its potential returns per unit of risk. China Mobile is currently generating about 0.02 per unit of risk. If you would invest  2,845  in K Way Information on December 27, 2024 and sell it today you would earn a total of  1,005  from holding K Way Information or generate 35.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

K Way Information  vs.  China Mobile

K Way Information

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K Way Information are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K Way showed solid returns over the last few months and may actually be approaching a breakup point.

China Mobile

Risk-Adjusted Performance

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with K Way and China Mobile

The main advantage of trading using opposite K Way and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if K Way 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 K Way Information and China Mobile 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.