Correlation Between China Mobile and Montage Technology

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

Diversification Opportunities for China Mobile and Montage Technology

-0.34

Correlation Coefficient

China Mobile  Montage Technology

Very good diversification

The 3 months correlation between China and Montage is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Montage Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montage Technology 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 Montage Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montage Technology has no effect on the direction of China Mobile i.e., China Mobile and Montage Technology go up and down completely randomly.

Pair Corralation between China Mobile and Montage Technology

Assuming the 90 days trading horizon China Mobile Limited is expected to under-perform the Montage Technology. But the stock apears to be less risky and, when comparing its historical volatility, China Mobile Limited is 2.56 times less risky than Montage Technology. The stock trades about -0.12 of its potential returns per unit of risk. The Montage Technology Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7,241  in Montage Technology Co on December 25, 2024 and sell it today you would earn a total of  185.00  from holding Montage Technology Co or generate 2.55% 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.  Montage Technology Co

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.

Montage Technology

Risk-Adjusted Performance

Weak

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

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

The idea behind China Mobile Limited and Montage Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.