Correlation Between Zhongzhu Medical and China Telecom

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

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

Diversification Opportunities for Zhongzhu Medical and China Telecom

-0.22

Correlation Coefficient

Zhongzhu Medical  China Telecom

Very good diversification

The 3 months correlation between Zhongzhu and China is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Zhongzhu Medical Holdings 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 Zhongzhu Medical 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 Zhongzhu Medical Holdings 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 Zhongzhu Medical i.e., Zhongzhu Medical and China Telecom go up and down completely randomly.

Pair Corralation between Zhongzhu Medical and China Telecom

Assuming the 90 days trading horizon Zhongzhu Medical is expected to generate 2.86 times less return on investment than China Telecom. In addition to that, Zhongzhu Medical is 1.72 times more volatile than China Telecom Corp. It trades about 0.01 of its total potential returns per unit of risk. China Telecom Corp is currently generating about 0.06 per unit of volatility. If you would invest  652.00  in China Telecom Corp on October 26, 2024 and sell it today you would earn a total of  33.00  from holding China Telecom Corp or generate 5.06% return on investment over 90 days.

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

Zhongzhu Medical Holdings  vs.  China Telecom Corp

Zhongzhu Medical Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Telecom Corp

Risk-Adjusted Performance

4 of 100

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 strong basic indicators, China Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Zhongzhu Medical and China Telecom

The main advantage of trading using opposite Zhongzhu Medical and China Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongzhu Medical 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 Zhongzhu Medical Holdings 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.