Correlation Between China Telecom and Vodafone Group

Can any of the company-specific risk be diversified away by investing in both China Telecom and Vodafone Group 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 China Telecom and Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Telecom and Vodafone Group PLC, you can compare the effects of market volatilities on China Telecom and Vodafone Group 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 China Telecom with a short position of Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Telecom and Vodafone Group.

Diversification Opportunities for China Telecom and Vodafone Group

0.0

Correlation Coefficient

China Telecom  Vodafone Group

Pay attention - limited upside

The 3 months correlation between China and Vodafone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Telecom and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC and China Telecom 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 China Telecom are associated (or correlated) with Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of China Telecom i.e., China Telecom and Vodafone Group go up and down completely randomly.

Pair Corralation between China Telecom and Vodafone Group

If you would invest (100.00) in China Telecom on January 28, 2024 and sell it today you would earn a total of  100.00  from holding China Telecom or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

China Telecom  vs.  Vodafone Group PLC

China Telecom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, China Telecom is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vodafone Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodafone Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Vodafone Group is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with China Telecom and Vodafone Group

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

The idea behind China Telecom and Vodafone Group PLC 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.