Correlation Between Citic Telecom and WPP SP
Can any of the company-specific risk be diversified away by investing in both Citic Telecom and WPP SP 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 Citic Telecom and WPP SP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citic Telecom International and WPP SP ADR, you can compare the effects of market volatilities on Citic Telecom and WPP SP 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 Citic Telecom with a short position of WPP SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Telecom and WPP SP.
Diversification Opportunities for Citic Telecom and WPP SP
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citic and WPP is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and WPP SP ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP SP ADR and Citic 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 Citic Telecom International are associated (or correlated) with WPP SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP SP ADR has no effect on the direction of Citic Telecom i.e., Citic Telecom and WPP SP go up and down completely randomly.
Pair Corralation between Citic Telecom and WPP SP
Assuming the 90 days trading horizon Citic Telecom is expected to generate 1.26 times less return on investment than WPP SP. In addition to that, Citic Telecom is 1.9 times more volatile than WPP SP ADR. It trades about 0.08 of its total potential returns per unit of risk. WPP SP ADR is currently generating about 0.19 per unit of volatility. If you would invest 4,940 in WPP SP ADR on September 5, 2024 and sell it today you would earn a total of 260.00 from holding WPP SP ADR or generate 5.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Citic Telecom International vs. WPP SP ADR
Performance |
| Timeline |
| Citic Telecom Intern |
| WPP SP ADR |
Citic Telecom and WPP SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citic Telecom and WPP SP
The main advantage of trading using opposite Citic Telecom and WPP SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Telecom position performs unexpectedly, WPP SP 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 WPP SP will offset losses from the drop in WPP SP's long position.| Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc |
| WPP SP vs. Ribbon Communications | WPP SP vs. ZURICH INSURANCE GROUP | WPP SP vs. Citic Telecom International | WPP SP vs. Safety Insurance Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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