Correlation Between China Mobile and Shenzhen Mindray

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

Diversification Opportunities for China Mobile and Shenzhen Mindray

0.45

Correlation Coefficient

China Mobile  Shenzhen Mindray

Very weak diversification

The 3 months correlation between China and Shenzhen is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Shenzhen Mindray Bio Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Mindray Bio 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 Shenzhen Mindray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Mindray Bio has no effect on the direction of China Mobile i.e., China Mobile and Shenzhen Mindray go up and down completely randomly.

Pair Corralation between China Mobile and Shenzhen Mindray

Assuming the 90 days trading horizon China Mobile Limited is expected to under-perform the Shenzhen Mindray. But the stock apears to be less risky and, when comparing its historical volatility, China Mobile Limited is 1.19 times less risky than Shenzhen Mindray. The stock trades about -0.12 of its potential returns per unit of risk. The Shenzhen Mindray Bio Medical is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  25,879  in Shenzhen Mindray Bio Medical on December 30, 2024 and sell it today you would lose (2,071) from holding Shenzhen Mindray Bio Medical or give up 8.0% of portfolio value over 90 days.

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

China Mobile Limited  vs.  Shenzhen Mindray Bio Medical

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.

Shenzhen Mindray Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Mindray Bio Medical 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.

Pair Trading with China Mobile and Shenzhen Mindray

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

The idea behind China Mobile Limited and Shenzhen Mindray Bio Medical 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .