Correlation Between CHINA TELECOM and SolarEdge Technologies

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

By analyzing existing cross correlation between CHINA TELECOM H and SolarEdge Technologies, you can compare the effects of market volatilities on CHINA TELECOM and SolarEdge Technologies 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 TELECOM with a short position of SolarEdge Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and SolarEdge Technologies.

Diversification Opportunities for CHINA TELECOM and SolarEdge Technologies

0.0

Correlation Coefficient

CHINA TELECOM  SolarEdge Technologies

Pay attention - limited upside

The 3 months correlation between CHINA and SolarEdge is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and SolarEdge Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolarEdge Technologies and CHINA 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 CHINA TELECOM H are associated (or correlated) with SolarEdge Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolarEdge Technologies has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and SolarEdge Technologies go up and down completely randomly.

Pair Corralation between CHINA TELECOM and SolarEdge Technologies

If you would invest  1,237  in SolarEdge Technologies on December 4, 2024 and sell it today you would earn a total of  113.00  from holding SolarEdge Technologies or generate 9.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CHINA TELECOM H   vs.  SolarEdge Technologies

CHINA TELECOM H

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA TELECOM H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

SolarEdge Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SolarEdge Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SolarEdge Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA TELECOM and SolarEdge Technologies

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

The idea behind CHINA TELECOM H and SolarEdge Technologies 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.