Correlation Between ATT and China Resources

Can any of the company-specific risk be diversified away by investing in both ATT and China Resources 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 Resources 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 Resources Power, you can compare the effects of market volatilities on ATT and China Resources 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 Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and China Resources.

Diversification Opportunities for ATT and China Resources

-0.83

Correlation Coefficient

ATT  China Resources

Pay attention - limited upside

The 3 months correlation between ATT and China is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power 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 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of ATT i.e., ATT and China Resources go up and down completely randomly.

Pair Corralation between ATT and China Resources

Taking into account the 90-day investment horizon ATT Inc is expected to under-perform the China Resources. But the stock apears to be less risky and, when comparing its historical volatility, ATT Inc is 1.57 times less risky than China Resources. The stock trades about -0.05 of its potential returns per unit of risk. The China Resources Power is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,601  in China Resources Power on September 23, 2024 and sell it today you would earn a total of  149.00  from holding China Resources Power or generate 4.14% return on investment over 90 days.

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

ATT Inc  vs.  China Resources Power

ATT Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

China Resources Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Resources Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ATT and China Resources

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

The idea behind ATT Inc and China Resources 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 CEOs Directory module to screen CEOs from public companies around the world.