Correlation Between Citic Telecom and American Eagle
Can any of the company-specific risk be diversified away by investing in both Citic Telecom and American Eagle 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 American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on Citic Telecom and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Telecom and American Eagle.
Diversification Opportunities for Citic Telecom and American Eagle
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Citic and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of Citic Telecom i.e., Citic Telecom and American Eagle go up and down completely randomly.
Pair Corralation between Citic Telecom and American Eagle
Assuming the 90 days trading horizon Citic Telecom International is expected to generate 2.8 times more return on investment than American Eagle. However, Citic Telecom is 2.8 times more volatile than American Eagle Outfitters. It trades about 0.07 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.05 per unit of risk. If you would invest 8.69 in Citic Telecom International on September 12, 2024 and sell it today you would earn a total of 18.31 from holding Citic Telecom International or generate 210.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citic Telecom International vs. American Eagle Outfitters
Performance |
| Timeline |
| Citic Telecom Intern |
| American Eagle Outfitters |
Citic Telecom and American Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citic Telecom and American Eagle
The main advantage of trading using opposite Citic Telecom and American Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Telecom position performs unexpectedly, American Eagle 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 American Eagle will offset losses from the drop in American Eagle's long position.| Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc |
| American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle vs. Apple Inc | American Eagle 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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