Correlation Between China Mobile and Orient Sec

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

Diversification Opportunities for China Mobile and Orient Sec

-0.14

Correlation Coefficient

China Mobile  Orient Sec

Good diversification

The 3 months correlation between China and Orient is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Orient Sec Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Sec 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 Orient Sec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Sec has no effect on the direction of China Mobile i.e., China Mobile and Orient Sec go up and down completely randomly.

Pair Corralation between China Mobile and Orient Sec

Assuming the 90 days trading horizon China Mobile Limited is expected to generate 0.9 times more return on investment than Orient Sec. However, China Mobile Limited is 1.11 times less risky than Orient Sec. It trades about 0.06 of its potential returns per unit of risk. Orient Sec Co is currently generating about 0.01 per unit of risk. If you would invest  7,374  in China Mobile Limited on October 6, 2024 and sell it today you would earn a total of  4,034  from holding China Mobile Limited or generate 54.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.78%
Values	Daily Returns

China Mobile Limited  vs.  Orient Sec 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.

Orient Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orient Sec 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 Orient Sec

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

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