Correlation Between DATA MODUL and China Communications

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

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

Diversification Opportunities for DATA MODUL and China Communications

-0.45

Correlation Coefficient

DATA MODUL  China Communications

Very good diversification

The 3 months correlation between DATA and China is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding DATA MODUL and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and DATA MODUL 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 DATA MODUL 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 DATA MODUL i.e., DATA MODUL and China Communications go up and down completely randomly.

Pair Corralation between DATA MODUL and China Communications

Assuming the 90 days trading horizon DATA MODUL is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, DATA MODUL is 2.96 times less risky than China Communications. The stock trades about -0.06 of its potential returns per unit of risk. The China Communications Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8.71  in China Communications Services on October 27, 2024 and sell it today you would earn a total of  43.29  from holding China Communications Services or generate 497.01% return on investment over 90 days.

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

DATA MODUL   vs.  China Communications Services

DATA MODUL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DATA MODUL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

China Communications

Risk-Adjusted Performance

4 of 100

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 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 DATA MODUL and China Communications

The main advantage of trading using opposite DATA MODUL and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATA MODUL 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 DATA MODUL 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.