Correlation Between Alphabet and CHINA TELECOM
Can any of the company-specific risk be diversified away by investing in both Alphabet 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 Alphabet and CHINA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphabet Class A and CHINA TELECOM H , you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of CHINA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and CHINA TELECOM.
Diversification Opportunities for Alphabet and CHINA TELECOM
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alphabet and CHINA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Class A and CHINA TELECOM H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA TELECOM H and Alphabet 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 Alphabet Class A 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 H has no effect on the direction of Alphabet i.e., Alphabet and CHINA TELECOM go up and down completely randomly.
Pair Corralation between Alphabet and CHINA TELECOM
Assuming the 90 days trading horizon Alphabet is expected to generate 5.65 times less return on investment than CHINA TELECOM. But when comparing it to its historical volatility, Alphabet Class A is 3.44 times less risky than CHINA TELECOM. It trades about 0.05 of its potential returns per unit of risk. CHINA TELECOM H is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4.64 in CHINA TELECOM H on February 14, 2024 and sell it today you would earn a total of 46.36 from holding CHINA TELECOM H or generate 999.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alphabet Class A vs. CHINA TELECOM H
Performance |
Timeline |
Alphabet Class A |
CHINA TELECOM H |
Alphabet and CHINA TELECOM Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alphabet and CHINA TELECOM
The main advantage of trading using opposite Alphabet and CHINA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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.Alphabet vs. Alphabet Class A | Alphabet vs. Alphabet | Alphabet vs. Tencent Holdings Ltd | Alphabet vs. Meta Platforms |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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