Correlation Between Ye Chiu and China Telecom

Can any of the company-specific risk be diversified away by investing in both Ye Chiu and China Telecom 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 Ye Chiu and China Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ye Chiu Metal and China Telecom Corp, you can compare the effects of market volatilities on Ye Chiu and China Telecom 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 Ye Chiu with a short position of China Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ye Chiu and China Telecom.

Diversification Opportunities for Ye Chiu and China Telecom

-0.37

Correlation Coefficient

Ye Chiu  China Telecom

Very good diversification

The 3 months correlation between 601388 and China is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ye Chiu Metal and China Telecom Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Telecom Corp and Ye Chiu 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 Ye Chiu Metal are associated (or correlated) with China Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Telecom Corp has no effect on the direction of Ye Chiu i.e., Ye Chiu and China Telecom go up and down completely randomly.

Pair Corralation between Ye Chiu and China Telecom

Assuming the 90 days trading horizon Ye Chiu is expected to generate 2.15 times less return on investment than China Telecom. In addition to that, Ye Chiu is 1.49 times more volatile than China Telecom Corp. It trades about 0.03 of its total potential returns per unit of risk. China Telecom Corp is currently generating about 0.08 per unit of volatility. If you would invest  589.00  in China Telecom Corp on October 26, 2024 and sell it today you would earn a total of  96.00  from holding China Telecom Corp or generate 16.3% return on investment over 90 days.

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

Ye Chiu Metal  vs.  China Telecom Corp

Ye Chiu Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ye Chiu Metal 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.

China Telecom Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Telecom Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ye Chiu and China Telecom

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

The idea behind Ye Chiu Metal and China Telecom Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.