Correlation Between China Mobile and Shanghai Rightongene

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

Diversification Opportunities for China Mobile and Shanghai Rightongene

-0.15

Correlation Coefficient

China Mobile  Shanghai Rightongene

Good diversification

The 3 months correlation between China and Shanghai is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Shanghai Rightongene Biotechno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Rightongene 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 Shanghai Rightongene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Rightongene has no effect on the direction of China Mobile i.e., China Mobile and Shanghai Rightongene go up and down completely randomly.

Pair Corralation between China Mobile and Shanghai Rightongene

Assuming the 90 days trading horizon China Mobile is expected to generate 1.12 times less return on investment than Shanghai Rightongene. But when comparing it to its historical volatility, China Mobile Limited is 2.32 times less risky than Shanghai Rightongene. It trades about 0.02 of its potential returns per unit of risk. Shanghai Rightongene Biotechnology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,155  in Shanghai Rightongene Biotechnology on December 1, 2024 and sell it today you would lose (17.00) from holding Shanghai Rightongene Biotechnology or give up 0.79% of portfolio value over 90 days.

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

China Mobile Limited  vs.  Shanghai Rightongene Biotechno

China Mobile Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 1 (%) 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.

Shanghai Rightongene

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shanghai Rightongene Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shanghai Rightongene 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 Shanghai Rightongene

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

The idea behind China Mobile Limited and Shanghai Rightongene Biotechnology 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.