Correlation Between China Unicom and B Communications

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Can any of the company-specific risk be diversified away by investing in both China Unicom and B 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 China Unicom and B Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Unicom Limited and B Communications, you can compare the effects of market volatilities on China Unicom and B 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 China Unicom with a short position of B Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Unicom and B Communications.

Diversification Opportunities for China Unicom and B Communications

0.0
  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between China Unicom and B Communications

If you would invest (100.00) in B Communications on December 30, 2023 and sell it today you would earn a total of  100.00  from holding B Communications or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

China Unicom Limited  vs.  B Communications

 Performance 
       Timeline  
China Unicom Limited 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days China Unicom Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, China Unicom is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
B Communications 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days B Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, B Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

China Unicom and B Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Unicom and B Communications

The main advantage of trading using opposite China Unicom and B Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Unicom position performs unexpectedly, B 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 B Communications will offset losses from the drop in B Communications' long position.
The idea behind China Unicom Limited and B Communications 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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