Correlation Between China Communications and Entain Plc

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

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

Diversification Opportunities for China Communications and Entain Plc

0.07

Correlation Coefficient

China Communications  Entain Plc

Significant diversification

The 3 months correlation between China and Entain is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Entain Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entain Plc and China Communications 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 Communications Services are associated (or correlated) with Entain Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entain Plc has no effect on the direction of China Communications i.e., China Communications and Entain Plc go up and down completely randomly.

Pair Corralation between China Communications and Entain Plc

Assuming the 90 days horizon China Communications Services is expected to generate 1.09 times more return on investment than Entain Plc. However, China Communications is 1.09 times more volatile than Entain Plc. It trades about 0.05 of its potential returns per unit of risk. Entain Plc is currently generating about -0.03 per unit of risk. If you would invest  53.00  in China Communications Services on December 20, 2024 and sell it today you would earn a total of  4.00  from holding China Communications Services or generate 7.55% return on investment over 90 days.

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

China Communications Services  vs.  Entain Plc

China Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Entain Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entain Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with China Communications and Entain Plc

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

The idea behind China Communications Services and Entain Plc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.