Correlation Between Shandong Publishing and China Telecom

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

By analyzing existing cross correlation between Shandong Publishing Media and China Telecom Corp, you can compare the effects of market volatilities on Shandong Publishing and China 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 Shandong Publishing with a short position of China Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Publishing and China Telecom.

Diversification Opportunities for Shandong Publishing and China Telecom

-0.45

Correlation Coefficient

Shandong Publishing  China Telecom

Very good diversification

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

Pair Corralation between Shandong Publishing and China Telecom

Assuming the 90 days trading horizon Shandong Publishing Media is expected to under-perform the China Telecom. In addition to that, Shandong Publishing is 1.31 times more volatile than China Telecom Corp. It trades about -0.03 of its total potential returns per unit of risk. China Telecom Corp is currently generating about 0.12 per unit of volatility. If you would invest  593.00  in China Telecom Corp on September 15, 2024 and sell it today you would earn a total of  86.00  from holding China Telecom Corp or generate 14.5% return on investment over 90 days.

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

Shandong Publishing Media  vs.  China Telecom Corp

Shandong Publishing Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shandong Publishing Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shandong Publishing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Telecom Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Telecom Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Telecom sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shandong Publishing and China Telecom

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

The idea behind Shandong Publishing Media and China Telecom Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.