Correlation Between CHINA TELECOM and Umicore SA

Can any of the company-specific risk be diversified away by investing in both CHINA TELECOM and Umicore SA 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 Umicore SA 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 Umicore SA, you can compare the effects of market volatilities on CHINA TELECOM and Umicore SA 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 Umicore SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and Umicore SA.

Diversification Opportunities for CHINA TELECOM and Umicore SA

0.12

Correlation Coefficient

CHINA TELECOM  Umicore SA

Average diversification

The 3 months correlation between CHINA and Umicore is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA 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 Umicore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umicore SA has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and Umicore SA go up and down completely randomly.

Pair Corralation between CHINA TELECOM and Umicore SA

Assuming the 90 days trading horizon CHINA TELECOM is expected to generate 2.39 times less return on investment than Umicore SA. But when comparing it to its historical volatility, CHINA TELECOM H is 1.99 times less risky than Umicore SA. It trades about 0.03 of its potential returns per unit of risk. Umicore SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,067  in Umicore SA on September 13, 2024 and sell it today you would earn a total of  42.00  from holding Umicore SA or generate 3.94% return on investment over 90 days.

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

CHINA TELECOM H   vs.  Umicore SA

CHINA TELECOM H

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA TELECOM H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Umicore SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Umicore SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Umicore SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHINA TELECOM and Umicore SA

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

The idea behind CHINA TELECOM H and Umicore SA 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..