Correlation Between Dr Peng and Gome Telecom

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

By analyzing existing cross correlation between Dr Peng Telecom and Gome Telecom Equipment, you can compare the effects of market volatilities on Dr Peng and Gome 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 Dr Peng with a short position of Gome Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Peng and Gome Telecom.

Diversification Opportunities for Dr Peng and Gome Telecom

0.04

Correlation Coefficient

Dr Peng  Gome Telecom

Significant diversification

The 3 months correlation between 600804 and Gome is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Dr Peng Telecom and Gome Telecom Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gome Telecom Equipment and Dr Peng 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 Dr Peng Telecom are associated (or correlated) with Gome Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gome Telecom Equipment has no effect on the direction of Dr Peng i.e., Dr Peng and Gome Telecom go up and down completely randomly.

Pair Corralation between Dr Peng and Gome Telecom

Assuming the 90 days trading horizon Dr Peng Telecom is expected to generate 1.52 times more return on investment than Gome Telecom. However, Dr Peng is 1.52 times more volatile than Gome Telecom Equipment. It trades about -0.01 of its potential returns per unit of risk. Gome Telecom Equipment is currently generating about -1.02 per unit of risk. If you would invest  189.00  in Dr Peng Telecom on October 26, 2024 and sell it today you would lose (5.00) from holding Dr Peng Telecom or give up 2.65% of portfolio value over 90 days.

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

Dr Peng Telecom  vs.  Gome Telecom Equipment

Dr Peng Telecom

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Gome Telecom Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gome Telecom Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dr Peng and Gome Telecom

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

The idea behind Dr Peng Telecom and Gome Telecom Equipment 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..