Correlation Between USWE SPORTS and China Mobile

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

By analyzing existing cross correlation between USWE SPORTS AB and China Life Insurance, you can compare the effects of market volatilities on USWE SPORTS and China Mobile 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 USWE SPORTS with a short position of China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of USWE SPORTS and China Mobile.

Diversification Opportunities for USWE SPORTS and China Mobile

0.51

Correlation Coefficient

USWE SPORTS  China Mobile

Very weak diversification

The 3 months correlation between USWE and China is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding USWE SPORTS AB and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance and USWE SPORTS 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 USWE SPORTS AB are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of USWE SPORTS i.e., USWE SPORTS and China Mobile go up and down completely randomly.

Pair Corralation between USWE SPORTS and China Mobile

Assuming the 90 days horizon USWE SPORTS AB is expected to generate 1.34 times more return on investment than China Mobile. However, USWE SPORTS is 1.34 times more volatile than China Life Insurance. It trades about 0.12 of its potential returns per unit of risk. China Life Insurance is currently generating about -0.36 per unit of risk. If you would invest  72.00  in USWE SPORTS AB on October 11, 2024 and sell it today you would earn a total of  3.00  from holding USWE SPORTS AB or generate 4.17% return on investment over 90 days.

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

USWE SPORTS AB  vs.  China Life Insurance

USWE SPORTS AB

Risk-Adjusted Performance

11 of 100

Good

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

China Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Mobile is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with USWE SPORTS and China Mobile

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

The idea behind USWE SPORTS AB and China Life Insurance 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.