Correlation Between Carmat SA and China Communications

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

By analyzing existing cross correlation between Carmat SA and China Communications Services, you can compare the effects of market volatilities on Carmat SA and China Communications 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 Carmat SA with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carmat SA and China Communications.

Diversification Opportunities for Carmat SA and China Communications

-0.36

Correlation Coefficient

Carmat SA  China Communications

Very good diversification

The 3 months correlation between Carmat and China is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Carmat SA and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and Carmat SA 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 Carmat SA are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Carmat SA i.e., Carmat SA and China Communications go up and down completely randomly.

Pair Corralation between Carmat SA and China Communications

Assuming the 90 days horizon Carmat SA is expected to under-perform the China Communications. In addition to that, Carmat SA is 1.38 times more volatile than China Communications Services. It trades about -0.03 of its total potential returns per unit of risk. China Communications Services is currently generating about 0.0 per unit of volatility. If you would invest  55.00  in China Communications Services on December 29, 2024 and sell it today you would lose (2.00) from holding China Communications Services or give up 3.64% of portfolio value over 90 days.

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

Carmat SA  vs.  China Communications Services

Carmat SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

China Communications

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Carmat SA and China Communications

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

The idea behind Carmat SA and China Communications Services 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.