Correlation Between ATT and China Communications
Can any of the company-specific risk be diversified away by investing in both ATT and China Communications 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 ATT and China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and China Communications Services, you can compare the effects of market volatilities on ATT and China Communications 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 ATT with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and China Communications.
Diversification Opportunities for ATT and China Communications
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ATT and China is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and ATT 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 ATT Inc are associated (or correlated) with China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of ATT i.e., ATT and China Communications go up and down completely randomly.
Pair Corralation between ATT and China Communications
Assuming the 90 days trading horizon ATT Inc is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.1 times less risky than China Communications. The stock trades about -0.02 of its potential returns per unit of risk. The China Communications Services is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 48.00 in China Communications Services on September 25, 2024 and sell it today you would earn a total of 5.00 from holding China Communications Services or generate 10.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
ATT Inc vs. China Communications Services
Performance |
Timeline |
ATT Inc |
China Communications |
ATT and China Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ATT and China Communications
The main advantage of trading using opposite ATT and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT position performs unexpectedly, China Communications 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 Communications will offset losses from the drop in China Communications' long position.The idea behind ATT Inc and China Communications Services 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.China Communications vs. Comba Telecom Systems | China Communications vs. Internet Thailand PCL | China Communications vs. United Internet AG | China Communications vs. Shenandoah Telecommunications |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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