Correlation Between China Communications and GAMING FAC

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

Diversification Opportunities for China Communications and GAMING FAC

-0.37

Correlation Coefficient

China Communications  GAMING FAC

Very good diversification

The 3 months correlation between China and GAMING is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and GAMING FAC SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMING FAC SA 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 GAMING FAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMING FAC SA has no effect on the direction of China Communications i.e., China Communications and GAMING FAC go up and down completely randomly.

Pair Corralation between China Communications and GAMING FAC

Assuming the 90 days horizon China Communications is expected to generate 74.15 times less return on investment than GAMING FAC. But when comparing it to its historical volatility, China Communications Services is 1.83 times less risky than GAMING FAC. It trades about 0.01 of its potential returns per unit of risk. GAMING FAC SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  155.00  in GAMING FAC SA on October 24, 2024 and sell it today you would earn a total of  21.00  from holding GAMING FAC SA or generate 13.55% return on investment over 90 days.

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

China Communications Services  vs.  GAMING FAC SA

China Communications

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Communications Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, China Communications is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

GAMING FAC SA

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with China Communications and GAMING FAC

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

The idea behind China Communications Services and GAMING FAC SA 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.