Correlation Between Western Superconducting and China Telecom

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

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

Diversification Opportunities for Western Superconducting and China Telecom

-0.66

Correlation Coefficient

Western Superconducting  China Telecom

Excellent diversification

The 3 months correlation between Western and China is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Superconducting Tech 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 Western Superconducting 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 Western Superconducting Tech 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 Western Superconducting i.e., Western Superconducting and China Telecom go up and down completely randomly.

Pair Corralation between Western Superconducting and China Telecom

Assuming the 90 days trading horizon Western Superconducting Tech is expected to under-perform the China Telecom. In addition to that, Western Superconducting is 1.32 times more volatile than China Telecom Corp. It trades about -0.24 of its total potential returns per unit of risk. China Telecom Corp is currently generating about 0.0 per unit of volatility. If you would invest  698.00  in China Telecom Corp on October 15, 2024 and sell it today you would earn a total of  0.00  from holding China Telecom Corp or generate 0.0% return on investment over 90 days.

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

Western Superconducting Tech  vs.  China Telecom Corp

Western Superconducting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Superconducting Tech 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.

China Telecom Corp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Telecom Corp are ranked lower than 7 (%) 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 February 2025.

Pair Trading with Western Superconducting and China Telecom

The main advantage of trading using opposite Western Superconducting and China Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Superconducting 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 Western Superconducting Tech 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.