Correlation Between China Satellite and Nanjing Putian

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

By analyzing existing cross correlation between China Satellite Communications and Nanjing Putian Telecommunications, you can compare the effects of market volatilities on China Satellite and Nanjing Putian 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 Satellite with a short position of Nanjing Putian. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Satellite and Nanjing Putian.

Diversification Opportunities for China Satellite and Nanjing Putian

0.81

Correlation Coefficient

China Satellite  Nanjing Putian

Very poor diversification

The 3 months correlation between China and Nanjing is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Satellite Communications and Nanjing Putian Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Putian Telec and China Satellite 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 Satellite Communications are associated (or correlated) with Nanjing Putian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Putian Telec has no effect on the direction of China Satellite i.e., China Satellite and Nanjing Putian go up and down completely randomly.

Pair Corralation between China Satellite and Nanjing Putian

Assuming the 90 days trading horizon China Satellite Communications is expected to generate 0.96 times more return on investment than Nanjing Putian. However, China Satellite Communications is 1.04 times less risky than Nanjing Putian. It trades about 0.05 of its potential returns per unit of risk. Nanjing Putian Telecommunications is currently generating about 0.03 per unit of risk. If you would invest  1,214  in China Satellite Communications on October 5, 2024 and sell it today you would earn a total of  747.00  from holding China Satellite Communications or generate 61.53% return on investment over 90 days.

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

China Satellite Communications  vs.  Nanjing Putian Telecommunicati

China Satellite Comm

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Satellite Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Satellite sustained solid returns over the last few months and may actually be approaching a breakup point.

Nanjing Putian Telec

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Putian Telecommunications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Putian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Satellite and Nanjing Putian

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

The idea behind China Satellite Communications and Nanjing Putian Telecommunications 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.