Correlation Between China Communications and Newmont

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

Diversification Opportunities for China Communications and Newmont

0.05

Correlation Coefficient

China Communications  Newmont

Significant diversification

The 3 months correlation between China and Newmont is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Services and Newmont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newmont 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 Newmont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newmont has no effect on the direction of China Communications i.e., China Communications and Newmont go up and down completely randomly.

Pair Corralation between China Communications and Newmont

Assuming the 90 days horizon China Communications Services is expected to generate 0.81 times more return on investment than Newmont. However, China Communications Services is 1.24 times less risky than Newmont. It trades about 0.03 of its potential returns per unit of risk. Newmont is currently generating about -0.13 per unit of risk. If you would invest  52.00  in China Communications Services on October 24, 2024 and sell it today you would earn a total of  1.00  from holding China Communications Services or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

China Communications Services  vs.  Newmont

China Communications

Risk-Adjusted Performance

2 of 100

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.

Newmont

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newmont has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with China Communications and Newmont

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

The idea behind China Communications Services and Newmont 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.