Correlation Between CHINA TELECOM and Qingling Motors

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

Diversification Opportunities for CHINA TELECOM and Qingling Motors

0.45

Correlation Coefficient

CHINA TELECOM  Qingling Motors

Very weak diversification

The 3 months correlation between CHINA and Qingling is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and Qingling Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qingling Motors 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 Qingling Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qingling Motors has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and Qingling Motors go up and down completely randomly.

Pair Corralation between CHINA TELECOM and Qingling Motors

Assuming the 90 days trading horizon CHINA TELECOM H is expected to generate 1.03 times more return on investment than Qingling Motors. However, CHINA TELECOM is 1.03 times more volatile than Qingling Motors Co. It trades about 0.11 of its potential returns per unit of risk. Qingling Motors Co is currently generating about 0.03 per unit of risk. If you would invest  22.00  in CHINA TELECOM H on September 14, 2024 and sell it today you would earn a total of  30.00  from holding CHINA TELECOM H or generate 136.36% return on investment over 90 days.

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

CHINA TELECOM H   vs.  Qingling Motors Co

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Qingling Motors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qingling Motors Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Qingling Motors reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA TELECOM and Qingling Motors

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

The idea behind CHINA TELECOM H and Qingling Motors Co 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.