Correlation Between China Mobile and Jointo Energy

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Can any of the company-specific risk be diversified away by investing in both China Mobile and Jointo Energy 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 Jointo Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Mobile Limited and Jointo Energy Investment, you can compare the effects of market volatilities on China Mobile and Jointo Energy 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 Jointo Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mobile and Jointo Energy.

Diversification Opportunities for China Mobile and Jointo Energy

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between China and Jointo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Jointo Energy Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jointo Energy Investment 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 Limited are associated (or correlated) with Jointo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jointo Energy Investment has no effect on the direction of China Mobile i.e., China Mobile and Jointo Energy go up and down completely randomly.

Pair Corralation between China Mobile and Jointo Energy

Assuming the 90 days trading horizon China Mobile Limited is expected to generate 0.47 times more return on investment than Jointo Energy. However, China Mobile Limited is 2.12 times less risky than Jointo Energy. It trades about 0.05 of its potential returns per unit of risk. Jointo Energy Investment is currently generating about -0.03 per unit of risk. If you would invest  11,014  in China Mobile Limited on October 6, 2024 and sell it today you would earn a total of  394.00  from holding China Mobile Limited or generate 3.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

China Mobile Limited  vs.  Jointo Energy Investment

 Performance 
       Timeline  
China Mobile Limited 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Mobile is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Jointo Energy Investment 

Risk-Adjusted Performance

0 of 100

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

China Mobile and Jointo Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Mobile and Jointo Energy

The main advantage of trading using opposite China Mobile and Jointo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile position performs unexpectedly, Jointo Energy 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 Jointo Energy will offset losses from the drop in Jointo Energy's long position.
The idea behind China Mobile Limited and Jointo Energy Investment 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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