Correlation Between Consolidated Communications and Datang International

Can any of the company-specific risk be diversified away by investing in both Consolidated Communications and Datang International 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 Consolidated Communications and Datang International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consolidated Communications Holdings and Datang International Power, you can compare the effects of market volatilities on Consolidated Communications and Datang International 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 Consolidated Communications with a short position of Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Communications and Datang International.

Diversification Opportunities for Consolidated Communications and Datang International

-0.23

Correlation Coefficient

Consolidated Communications  Datang International

Very good diversification

The 3 months correlation between Consolidated and Datang is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International and Consolidated Communications 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 Consolidated Communications Holdings are associated (or correlated) with Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of Consolidated Communications i.e., Consolidated Communications and Datang International go up and down completely randomly.

Pair Corralation between Consolidated Communications and Datang International

Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 0.18 times more return on investment than Datang International. However, Consolidated Communications Holdings is 5.62 times less risky than Datang International. It trades about 0.1 of its potential returns per unit of risk. Datang International Power is currently generating about 0.01 per unit of risk. If you would invest  444.00  in Consolidated Communications Holdings on September 28, 2024 and sell it today you would earn a total of  4.00  from holding Consolidated Communications Holdings or generate 0.9% return on investment over 90 days.

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

Consolidated Communications Ho  vs.  Datang International Power

Consolidated Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Consolidated Communications and Datang International

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

The idea behind Consolidated Communications Holdings and Datang International Power 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.