Correlation Between China Telecom and Sany Heavy

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

Diversification Opportunities for China Telecom and Sany Heavy

0.77

Correlation Coefficient

China Telecom  Sany Heavy

Poor diversification

The 3 months correlation between China and Sany is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding China Telecom Corp and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy 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 Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Energy has no effect on the direction of China Telecom i.e., China Telecom and Sany Heavy go up and down completely randomly.

Pair Corralation between China Telecom and Sany Heavy

Assuming the 90 days trading horizon China Telecom is expected to generate 2.45 times less return on investment than Sany Heavy. But when comparing it to its historical volatility, China Telecom Corp is 1.83 times less risky than Sany Heavy. It trades about 0.13 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,276  in Sany Heavy Energy on September 20, 2024 and sell it today you would earn a total of  995.00  from holding Sany Heavy Energy or generate 43.72% return on investment over 90 days.

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

China Telecom Corp  vs.  Sany Heavy Energy

China Telecom Corp

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Telecom Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Sany Heavy Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sany Heavy Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sany Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Telecom and Sany Heavy

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

The idea behind China Telecom Corp and Sany Heavy Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.