Correlation Between China Mobile and Shanghai CEO

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

Diversification Opportunities for China Mobile and Shanghai CEO

-0.56

Correlation Coefficient

China Mobile  Shanghai CEO

Excellent diversification

The 3 months correlation between China and Shanghai is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and Shanghai CEO Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai CEO Environ 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 CEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai CEO Environ has no effect on the direction of China Mobile i.e., China Mobile and Shanghai CEO go up and down completely randomly.

Pair Corralation between China Mobile and Shanghai CEO

Assuming the 90 days trading horizon China Mobile is expected to generate 2.9 times less return on investment than Shanghai CEO. But when comparing it to its historical volatility, China Mobile Limited is 2.18 times less risky than Shanghai CEO. It trades about 0.03 of its potential returns per unit of risk. Shanghai CEO Environmental is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Shanghai CEO Environmental on October 24, 2024 and sell it today you would earn a total of  55.00  from holding Shanghai CEO Environmental or generate 7.05% return on investment over 90 days.

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

China Mobile Limited  vs.  Shanghai CEO Environmental

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.

Shanghai CEO Environ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai CEO Environmental 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 Shanghai CEO

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

The idea behind China Mobile Limited and Shanghai CEO Environmental 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.