Correlation Between China Mobile and Fujian Longzhou

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

Diversification Opportunities for China Mobile and Fujian Longzhou

0.05

Correlation Coefficient

China Mobile  Fujian Longzhou

Significant diversification

The 3 months correlation between China and Fujian is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Fujian Longzhou Transportation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Longzhou Tran 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 Fujian Longzhou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Longzhou Tran has no effect on the direction of China Mobile i.e., China Mobile and Fujian Longzhou go up and down completely randomly.

Pair Corralation between China Mobile and Fujian Longzhou

Assuming the 90 days trading horizon China Mobile is expected to generate 1.76 times less return on investment than Fujian Longzhou. But when comparing it to its historical volatility, China Mobile Limited is 3.28 times less risky than Fujian Longzhou. It trades about 0.04 of its potential returns per unit of risk. Fujian Longzhou Transportation is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  396.00  in Fujian Longzhou Transportation on October 5, 2024 and sell it today you would earn a total of  2.00  from holding Fujian Longzhou Transportation or generate 0.51% return on investment over 90 days.

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

China Mobile Limited  vs.  Fujian Longzhou Transportation

China Mobile Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 4 (%) 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.

Fujian Longzhou Tran

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Mobile and Fujian Longzhou

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

The idea behind China Mobile Limited and Fujian Longzhou Transportation 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.