Correlation Between New China and COMBA TELECOM

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

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

Diversification Opportunities for New China and COMBA TELECOM

-0.33

Correlation Coefficient

New China  COMBA TELECOM

Very good diversification

The 3 months correlation between New and COMBA is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and COMBA TELECOM SYST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMBA TELECOM SYST and New China 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 New China Life are associated (or correlated) with COMBA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMBA TELECOM SYST has no effect on the direction of New China i.e., New China and COMBA TELECOM go up and down completely randomly.

Pair Corralation between New China and COMBA TELECOM

Assuming the 90 days trading horizon New China Life is expected to generate 2.99 times more return on investment than COMBA TELECOM. However, New China is 2.99 times more volatile than COMBA TELECOM SYST. It trades about 0.07 of its potential returns per unit of risk. COMBA TELECOM SYST is currently generating about 0.01 per unit of risk. If you would invest  51.00  in New China Life on October 11, 2024 and sell it today you would earn a total of  221.00  from holding New China Life or generate 433.33% return on investment over 90 days.

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

New China Life  vs.  COMBA TELECOM SYST

New China Life

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, New China is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

COMBA TELECOM SYST

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COMBA TELECOM SYST are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, COMBA TELECOM may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with New China and COMBA TELECOM

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

The idea behind New China Life and COMBA TELECOM SYST 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.