Correlation Between CKM Building and China Mobile

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

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

Diversification Opportunities for CKM Building and China Mobile

0.76

Correlation Coefficient

CKM Building  China Mobile

Poor diversification

The 3 months correlation between CKM and China is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CKM Building Material and China Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile and CKM Building 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 CKM Building Material are associated (or correlated) with China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile has no effect on the direction of CKM Building i.e., CKM Building and China Mobile go up and down completely randomly.

Pair Corralation between CKM Building and China Mobile

Assuming the 90 days trading horizon CKM Building Material is expected to generate 1.36 times more return on investment than China Mobile. However, CKM Building is 1.36 times more volatile than China Mobile. It trades about 0.27 of its potential returns per unit of risk. China Mobile is currently generating about 0.02 per unit of risk. If you would invest  3,275  in CKM Building Material on September 16, 2024 and sell it today you would earn a total of  260.00  from holding CKM Building Material or generate 7.94% return on investment over 90 days.

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

CKM Building Material  vs.  China Mobile

CKM Building Material

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CKM Building Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, CKM Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with CKM Building and China Mobile

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

The idea behind CKM Building Material and China Mobile 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.