Correlation Between China Mobile and Jiangxi Naipu

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

Diversification Opportunities for China Mobile and Jiangxi Naipu

-0.28

Correlation Coefficient

China Mobile  Jiangxi Naipu

Very good diversification

The 3 months correlation between China and Jiangxi is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining 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 Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of China Mobile i.e., China Mobile and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between China Mobile and Jiangxi Naipu

Assuming the 90 days trading horizon China Mobile is expected to generate 5.71 times less return on investment than Jiangxi Naipu. But when comparing it to its historical volatility, China Mobile Limited is 2.2 times less risky than Jiangxi Naipu. It trades about 0.03 of its potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,267  in Jiangxi Naipu Mining on October 24, 2024 and sell it today you would earn a total of  420.00  from holding Jiangxi Naipu Mining or generate 18.53% 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.  Jiangxi Naipu Mining

China Mobile Limited

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 5 (%) 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.

Jiangxi Naipu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Naipu Mining 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 Jiangxi Naipu

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

The idea behind China Mobile Limited and Jiangxi Naipu Mining 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.