Correlation Between China Mobile and Leatec Fine

Can any of the company-specific risk be diversified away by investing in both China Mobile and Leatec Fine 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 Mobile and Leatec Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Mobile and Leatec Fine Ceramics, you can compare the effects of market volatilities on China Mobile and Leatec Fine 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 Mobile with a short position of Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mobile and Leatec Fine.

Diversification Opportunities for China Mobile and Leatec Fine

-0.32

Correlation Coefficient

China Mobile  Leatec Fine

Very good diversification

The 3 months correlation between China and Leatec is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics and China Mobile 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 Mobile are associated (or correlated) with Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of China Mobile i.e., China Mobile and Leatec Fine go up and down completely randomly.

Pair Corralation between China Mobile and Leatec Fine

Assuming the 90 days trading horizon China Mobile is expected to under-perform the Leatec Fine. But the stock apears to be less risky and, when comparing its historical volatility, China Mobile is 2.79 times less risky than Leatec Fine. The stock trades about -0.03 of its potential returns per unit of risk. The Leatec Fine Ceramics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,655  in Leatec Fine Ceramics on September 13, 2024 and sell it today you would earn a total of  200.00  from holding Leatec Fine Ceramics or generate 7.53% return on investment over 90 days.

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

China Mobile  vs.  Leatec Fine Ceramics

China Mobile

Risk-Adjusted Performance

0 of 100

Very Weak

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

Leatec Fine Ceramics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Leatec Fine Ceramics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Leatec Fine may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Mobile and Leatec Fine

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

The idea behind China Mobile and Leatec Fine Ceramics 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.