Correlation Between China Tower and KDDI Corp

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

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

Diversification Opportunities for China Tower and KDDI Corp

0.15

Correlation Coefficient

China Tower  KDDI Corp

Average diversification

The 3 months correlation between China and KDDI is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Tower and KDDI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KDDI Corp and China Tower 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 Tower are associated (or correlated) with KDDI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KDDI Corp has no effect on the direction of China Tower i.e., China Tower and KDDI Corp go up and down completely randomly.

Pair Corralation between China Tower and KDDI Corp

Assuming the 90 days horizon China Tower is expected to generate 2.94 times more return on investment than KDDI Corp. However, China Tower is 2.94 times more volatile than KDDI Corp. It trades about 0.1 of its potential returns per unit of risk. KDDI Corp is currently generating about 0.03 per unit of risk. If you would invest  5.49  in China Tower on October 7, 2024 and sell it today you would earn a total of  10.51  from holding China Tower or generate 191.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.03%
Values	Daily Returns

China Tower  vs.  KDDI Corp

China Tower

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Tower are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Tower reported solid returns over the last few months and may actually be approaching a breakup point.

KDDI Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KDDI Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, KDDI Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Tower and KDDI Corp

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

The idea behind China Tower and KDDI 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.