Correlation Between China Communications and DEVRY EDUCATION

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

Diversification Opportunities for China Communications and DEVRY EDUCATION

0.07

Correlation Coefficient

China Communications  DEVRY EDUCATION

Significant diversification

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

Pair Corralation between China Communications and DEVRY EDUCATION

Assuming the 90 days horizon China Communications Services is expected to generate 0.75 times more return on investment than DEVRY EDUCATION. However, China Communications Services is 1.34 times less risky than DEVRY EDUCATION. It trades about 0.31 of its potential returns per unit of risk. DEVRY EDUCATION GRP is currently generating about 0.1 per unit of risk. If you would invest  51.00  in China Communications Services on October 5, 2024 and sell it today you would earn a total of  4.00  from holding China Communications Services or generate 7.84% 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.  DEVRY EDUCATION GRP

China Communications

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days China Communications Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, China Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DEVRY EDUCATION GRP

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days DEVRY EDUCATION GRP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, DEVRY EDUCATION unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Communications and DEVRY EDUCATION

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

The idea behind China Communications Services and DEVRY EDUCATION GRP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.