Correlation Between China Telecom and Nanhua Bio

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

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

Diversification Opportunities for China Telecom and Nanhua Bio

0.0

Correlation Coefficient

China Telecom  Nanhua Bio

Pay attention - limited upside

The 3 months correlation between China and Nanhua is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Telecom Corp and Nanhua Bio Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanhua Bio Medicine and China Telecom 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 Telecom Corp are associated (or correlated) with Nanhua Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanhua Bio Medicine has no effect on the direction of China Telecom i.e., China Telecom and Nanhua Bio go up and down completely randomly.

Pair Corralation between China Telecom and Nanhua Bio

If you would invest  602.00  in China Telecom Corp on August 31, 2024 and sell it today you would earn a total of  42.00  from holding China Telecom Corp or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.75%
Values	Daily Returns

China Telecom Corp  vs.  Nanhua Bio Medicine

China Telecom Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Telecom Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Telecom may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Nanhua Bio Medicine

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Nanhua Bio Medicine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nanhua Bio 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 Telecom and Nanhua Bio

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

The idea behind China Telecom Corp and Nanhua Bio Medicine 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.