Correlation Between Hunan TV and Gome Telecom

Can any of the company-specific risk be diversified away by investing in both Hunan TV and Gome 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 Hunan TV and Gome Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hunan TV Broadcast and Gome Telecom Equipment, you can compare the effects of market volatilities on Hunan TV and Gome 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 Hunan TV with a short position of Gome Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan TV and Gome Telecom.

Diversification Opportunities for Hunan TV and Gome Telecom

0.37

Correlation Coefficient

Hunan TV  Gome Telecom

Weak diversification

The 3 months correlation between Hunan and Gome is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hunan TV Broadcast and Gome Telecom Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gome Telecom Equipment and Hunan TV 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 Hunan TV Broadcast are associated (or correlated) with Gome Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gome Telecom Equipment has no effect on the direction of Hunan TV i.e., Hunan TV and Gome Telecom go up and down completely randomly.

Pair Corralation between Hunan TV and Gome Telecom

Assuming the 90 days trading horizon Hunan TV Broadcast is expected to generate 1.4 times more return on investment than Gome Telecom. However, Hunan TV is 1.4 times more volatile than Gome Telecom Equipment. It trades about 0.2 of its potential returns per unit of risk. Gome Telecom Equipment is currently generating about -0.05 per unit of risk. If you would invest  488.00  in Hunan TV Broadcast on September 23, 2024 and sell it today you would earn a total of  321.00  from holding Hunan TV Broadcast or generate 65.78% return on investment over 90 days.

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

Hunan TV Broadcast  vs.  Gome Telecom Equipment

Hunan TV Broadcast

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan TV Broadcast are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan TV sustained solid returns over the last few months and may actually be approaching a breakup point.

Gome Telecom Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gome Telecom Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hunan TV and Gome Telecom

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

The idea behind Hunan TV Broadcast and Gome Telecom Equipment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.