Correlation Between COMBA TELECOM and China Pacific

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

By analyzing existing cross correlation between COMBA TELECOM SYST and China Pacific Insurance, you can compare the effects of market volatilities on COMBA TELECOM and China Pacific 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 COMBA TELECOM with a short position of China Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMBA TELECOM and China Pacific.

Diversification Opportunities for COMBA TELECOM and China Pacific

0.27

Correlation Coefficient

COMBA TELECOM  China Pacific

Modest diversification

The 3 months correlation between COMBA and China is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding COMBA TELECOM SYST and China Pacific Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Pacific Insurance and COMBA TELECOM 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 COMBA TELECOM SYST are associated (or correlated) with China Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Pacific Insurance has no effect on the direction of COMBA TELECOM i.e., COMBA TELECOM and China Pacific go up and down completely randomly.

Pair Corralation between COMBA TELECOM and China Pacific

Assuming the 90 days trading horizon COMBA TELECOM SYST is expected to generate 1.23 times more return on investment than China Pacific. However, COMBA TELECOM is 1.23 times more volatile than China Pacific Insurance. It trades about 0.2 of its potential returns per unit of risk. China Pacific Insurance is currently generating about -0.02 per unit of risk. If you would invest  15.00  in COMBA TELECOM SYST on December 25, 2024 and sell it today you would earn a total of  7.00  from holding COMBA TELECOM SYST or generate 46.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

COMBA TELECOM SYST  vs.  China Pacific Insurance

COMBA TELECOM SYST

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COMBA TELECOM SYST are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, COMBA TELECOM unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Pacific Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Pacific Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with COMBA TELECOM and China Pacific

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

The idea behind COMBA TELECOM SYST and China Pacific Insurance 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.