Correlation Between China Mobile and Beijing Kingsoft

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

Diversification Opportunities for China Mobile and Beijing Kingsoft

0.19

Correlation Coefficient

China Mobile  Beijing Kingsoft

Average diversification

The 3 months correlation between China and Beijing is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Beijing Kingsoft Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kingsoft Office 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 Beijing Kingsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kingsoft Office has no effect on the direction of China Mobile i.e., China Mobile and Beijing Kingsoft go up and down completely randomly.

Pair Corralation between China Mobile and Beijing Kingsoft

Assuming the 90 days trading horizon China Mobile Limited is expected to under-perform the Beijing Kingsoft. But the stock apears to be less risky and, when comparing its historical volatility, China Mobile Limited is 2.63 times less risky than Beijing Kingsoft. The stock trades about -0.2 of its potential returns per unit of risk. The Beijing Kingsoft Office is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  29,235  in Beijing Kingsoft Office on October 23, 2024 and sell it today you would lose (1,275) from holding Beijing Kingsoft Office or give up 4.36% of portfolio value over 90 days.

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

China Mobile Limited  vs.  Beijing Kingsoft Office

China Mobile Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 4 (%) 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.

Beijing Kingsoft Office

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kingsoft Office are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kingsoft may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Mobile and Beijing Kingsoft

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

The idea behind China Mobile Limited and Beijing Kingsoft Office 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.