Correlation Between Gome Telecom and Dr Peng

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

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

Diversification Opportunities for Gome Telecom and Dr Peng

0.16

Correlation Coefficient

Gome Telecom  Dr Peng

Average diversification

The 3 months correlation between Gome and 600804 is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Gome Telecom Equipment and Dr Peng Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Peng Telecom and Gome Telecom 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 Gome Telecom Equipment are associated (or correlated) with Dr Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Peng Telecom has no effect on the direction of Gome Telecom i.e., Gome Telecom and Dr Peng go up and down completely randomly.

Pair Corralation between Gome Telecom and Dr Peng

Assuming the 90 days trading horizon Gome Telecom Equipment is expected to under-perform the Dr Peng. But the stock apears to be less risky and, when comparing its historical volatility, Gome Telecom Equipment is 2.04 times less risky than Dr Peng. The stock trades about -1.82 of its potential returns per unit of risk. The Dr Peng Telecom is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Dr Peng Telecom on October 10, 2024 and sell it today you would lose (30.00) from holding Dr Peng Telecom or give up 13.45% of portfolio value over 90 days.

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

Gome Telecom Equipment  vs.  Dr Peng Telecom

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.

Dr Peng Telecom

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 12 (%) 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.

Pair Trading with Gome Telecom and Dr Peng

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

The idea behind Gome Telecom Equipment and Dr Peng Telecom 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.