Correlation Between China Mobile and Jiangsu Changhai

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

Diversification Opportunities for China Mobile and Jiangsu Changhai

-0.15

Correlation Coefficient

China Mobile  Jiangsu Changhai

Good diversification

The 3 months correlation between China and Jiangsu is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Jiangsu Changhai Compos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Changhai Compos 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 Jiangsu Changhai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Changhai Compos has no effect on the direction of China Mobile i.e., China Mobile and Jiangsu Changhai go up and down completely randomly.

Pair Corralation between China Mobile and Jiangsu Changhai

Assuming the 90 days trading horizon China Mobile Limited is expected to under-perform the Jiangsu Changhai. But the stock apears to be less risky and, when comparing its historical volatility, China Mobile Limited is 1.18 times less risky than Jiangsu Changhai. The stock trades about -0.1 of its potential returns per unit of risk. The Jiangsu Changhai Compos is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,110  in Jiangsu Changhai Compos on December 26, 2024 and sell it today you would earn a total of  28.00  from holding Jiangsu Changhai Compos or generate 2.52% return on investment over 90 days.

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

China Mobile Limited  vs.  Jiangsu Changhai Compos

China Mobile Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Mobile Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Jiangsu Changhai Compos

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Changhai Compos are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Jiangsu Changhai 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 Jiangsu Changhai

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

The idea behind China Mobile Limited and Jiangsu Changhai Compos 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.