Correlation Between China Mobile and Western Securities

Can any of the company-specific risk be diversified away by investing in both China Mobile and Western Securities 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 Western Securities 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 Western Securities Co, you can compare the effects of market volatilities on China Mobile and Western Securities 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 Western Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mobile and Western Securities.

Diversification Opportunities for China Mobile and Western Securities

-0.23

Correlation Coefficient

China Mobile  Western Securities

Very good diversification

The 3 months correlation between China and Western is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Western Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Securities 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 Western Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Securities has no effect on the direction of China Mobile i.e., China Mobile and Western Securities go up and down completely randomly.

Pair Corralation between China Mobile and Western Securities

Assuming the 90 days trading horizon China Mobile Limited is expected to generate 0.41 times more return on investment than Western Securities. However, China Mobile Limited is 2.42 times less risky than Western Securities. It trades about 0.19 of its potential returns per unit of risk. Western Securities Co is currently generating about -0.08 per unit of risk. If you would invest  10,285  in China Mobile Limited on October 6, 2024 and sell it today you would earn a total of  1,123  from holding China Mobile Limited or generate 10.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

China Mobile Limited  vs.  Western Securities Co

China Mobile Limited

Risk-Adjusted Performance

3 of 100

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.

Western Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Securities Co 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 China Mobile and Western Securities

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

The idea behind China Mobile Limited and Western Securities Co 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..