Correlation Between China Communications and Covivio SA

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

Diversification Opportunities for China Communications and Covivio SA

0.52

Correlation Coefficient

China Communications  Covivio SA

Very weak diversification

The 3 months correlation between China and Covivio is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Covivio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covivio 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 Covivio SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covivio SA has no effect on the direction of China Communications i.e., China Communications and Covivio SA go up and down completely randomly.

Pair Corralation between China Communications and Covivio SA

Assuming the 90 days horizon China Communications Services is expected to generate 2.23 times more return on investment than Covivio SA. However, China Communications is 2.23 times more volatile than Covivio SA. It trades about 0.06 of its potential returns per unit of risk. Covivio SA is currently generating about 0.08 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  5.00  from holding China Communications Services or generate 9.43% return on investment over 90 days.

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

China Communications Services  vs.  Covivio SA

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 unfluctuating basic indicators, China Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Covivio SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Covivio SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Covivio SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with China Communications and Covivio SA

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

The idea behind China Communications Services and Covivio 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .