Correlation Between SERI INDUSTRIAL and CHINA TELECOM

Can any of the company-specific risk be diversified away by investing in both SERI INDUSTRIAL 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 SERI INDUSTRIAL and CHINA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SERI INDUSTRIAL EO and CHINA TELECOM H , you can compare the effects of market volatilities on SERI INDUSTRIAL 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 SERI INDUSTRIAL with a short position of CHINA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of SERI INDUSTRIAL and CHINA TELECOM.

Diversification Opportunities for SERI INDUSTRIAL and CHINA TELECOM

0.76

Correlation Coefficient

SERI INDUSTRIAL  CHINA TELECOM

Poor diversification

The 3 months correlation between SERI and CHINA is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SERI INDUSTRIAL EO 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 SERI INDUSTRIAL 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 SERI INDUSTRIAL EO 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 SERI INDUSTRIAL i.e., SERI INDUSTRIAL and CHINA TELECOM go up and down completely randomly.

Pair Corralation between SERI INDUSTRIAL and CHINA TELECOM

Assuming the 90 days trading horizon SERI INDUSTRIAL EO is expected to under-perform the CHINA TELECOM. In addition to that, SERI INDUSTRIAL is 9.92 times more volatile than CHINA TELECOM H . It trades about -0.16 of its total potential returns per unit of risk. CHINA TELECOM H is currently generating about -0.22 per unit of volatility. If you would invest  52.00  in CHINA TELECOM H on February 28, 2024 and sell it today you would lose (1.00) from holding CHINA TELECOM H or give up 1.92% of portfolio value over 90 days.

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

SERI INDUSTRIAL EO  vs.  CHINA TELECOM H

SERI INDUSTRIAL EO

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SERI INDUSTRIAL EO are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical indicators, SERI INDUSTRIAL reported solid returns over the last few months and may actually be approaching a breakup point.

CHINA TELECOM H

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA TELECOM H are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, CHINA TELECOM is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SERI INDUSTRIAL and CHINA TELECOM

The main advantage of trading using opposite SERI INDUSTRIAL and CHINA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SERI INDUSTRIAL 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.

The idea behind SERI INDUSTRIAL EO and CHINA TELECOM H 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..