Correlation Between CHINA TELECOM and RENTOKIL INITIAL

Can any of the company-specific risk be diversified away by investing in both CHINA TELECOM and RENTOKIL INITIAL 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 RENTOKIL INITIAL 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 RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on CHINA TELECOM and RENTOKIL INITIAL 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 RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and RENTOKIL INITIAL.

Diversification Opportunities for CHINA TELECOM and RENTOKIL INITIAL

-0.61

Correlation Coefficient

CHINA TELECOM  RENTOKIL INITIAL

Excellent diversification

The 3 months correlation between CHINA and RENTOKIL is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 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 RENTOKIL INITIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENTOKIL INITIAL ADR5 has no effect on the direction of CHINA TELECOM i.e., CHINA TELECOM and RENTOKIL INITIAL go up and down completely randomly.

Pair Corralation between CHINA TELECOM and RENTOKIL INITIAL

Assuming the 90 days trading horizon CHINA TELECOM H is expected to generate 1.3 times more return on investment than RENTOKIL INITIAL. However, CHINA TELECOM is 1.3 times more volatile than RENTOKIL INITIAL ADR5. It trades about 0.09 of its potential returns per unit of risk. RENTOKIL INITIAL ADR5 is currently generating about 0.01 per unit of risk. If you would invest  12.00  in CHINA TELECOM H on October 4, 2024 and sell it today you would earn a total of  40.00  from holding CHINA TELECOM H or generate 333.33% return on investment over 90 days.

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

CHINA TELECOM H   vs.  RENTOKIL INITIAL ADR5

CHINA TELECOM H

Risk-Adjusted Performance

0 of 100

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

RENTOKIL INITIAL ADR5

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RENTOKIL INITIAL ADR5 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, RENTOKIL INITIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CHINA TELECOM and RENTOKIL INITIAL

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

The idea behind CHINA TELECOM H and RENTOKIL INITIAL ADR5 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.