Correlation Between China Communications and AAC TECHNOLOGHLDGADR

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

By analyzing existing cross correlation between China Communications Construction and AAC TECHNOLOGHLDGADR, you can compare the effects of market volatilities on China Communications and AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Communications and AAC TECHNOLOGHLDGADR.

Diversification Opportunities for China Communications and AAC TECHNOLOGHLDGADR

-0.54

Correlation Coefficient

China Communications  AAC TECHNOLOGHLDGADR

Excellent diversification

The 3 months correlation between China and AAC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Communications Construct and AAC TECHNOLOGHLDGADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAC TECHNOLOGHLDGADR 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 Construction are associated (or correlated) with AAC TECHNOLOGHLDGADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAC TECHNOLOGHLDGADR has no effect on the direction of China Communications i.e., China Communications and AAC TECHNOLOGHLDGADR go up and down completely randomly.

Pair Corralation between China Communications and AAC TECHNOLOGHLDGADR

Assuming the 90 days horizon China Communications Construction is expected to under-perform the AAC TECHNOLOGHLDGADR. But the stock apears to be less risky and, when comparing its historical volatility, China Communications Construction is 2.49 times less risky than AAC TECHNOLOGHLDGADR. The stock trades about -0.07 of its potential returns per unit of risk. The AAC TECHNOLOGHLDGADR is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  454.00  in AAC TECHNOLOGHLDGADR on December 19, 2024 and sell it today you would earn a total of  136.00  from holding AAC TECHNOLOGHLDGADR or generate 29.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

China Communications Construct  vs.  AAC TECHNOLOGHLDGADR

China Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Communications Construction 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.

AAC TECHNOLOGHLDGADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC TECHNOLOGHLDGADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AAC TECHNOLOGHLDGADR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Communications and AAC TECHNOLOGHLDGADR

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

The idea behind China Communications Construction and AAC TECHNOLOGHLDGADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.