Correlation Between American Homes and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both American Homes and Citic 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 American Homes and Citic Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Homes 4 and Citic Telecom International, you can compare the effects of market volatilities on American Homes and Citic 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 American Homes with a short position of Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Homes and Citic Telecom.
Diversification Opportunities for American Homes and Citic Telecom
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Citic is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Homes 4 and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern and American Homes 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 American Homes 4 are associated (or correlated) with Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of American Homes i.e., American Homes and Citic Telecom go up and down completely randomly.
Pair Corralation between American Homes and Citic Telecom
Assuming the 90 days trading horizon American Homes is expected to generate 9.78 times less return on investment than Citic Telecom. But when comparing it to its historical volatility, American Homes 4 is 5.05 times less risky than Citic Telecom. It trades about 0.04 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Citic Telecom International on September 4, 2024 and sell it today you would earn a total of 16.00 from holding Citic Telecom International or generate 145.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Homes 4 vs. Citic Telecom International
Performance |
| Timeline |
| American Homes 4 |
| Citic Telecom Intern |
American Homes and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Homes and Citic Telecom
The main advantage of trading using opposite American Homes and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Homes position performs unexpectedly, Citic 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 Citic Telecom will offset losses from the drop in Citic Telecom's long position.The idea behind American Homes 4 and Citic Telecom International 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.| Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |