Correlation Between Citic Telecom and China Communications
Can any of the company-specific risk be diversified away by investing in both Citic Telecom and China 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 Citic Telecom and China Communications 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 China Communications Services, you can compare the effects of market volatilities on Citic Telecom and China 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 Citic Telecom with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Telecom and China Communications.
Diversification Opportunities for Citic Telecom and China Communications
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Citic and China is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Citic Telecom i.e., Citic Telecom and China Communications go up and down completely randomly.
Pair Corralation between Citic Telecom and China Communications
Assuming the 90 days trading horizon Citic Telecom International is expected to generate 1.43 times more return on investment than China Communications. However, Citic Telecom is 1.43 times more volatile than China Communications Services. It trades about 0.09 of its potential returns per unit of risk. China Communications Services is currently generating about -0.06 per unit of risk. If you would invest 26.00 in Citic Telecom International on August 30, 2024 and sell it today you would earn a total of 1.00 from holding Citic Telecom International or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Citic Telecom International vs. China Communications Services
Performance |
| Timeline |
| Citic Telecom Intern |
| China Communications |
Citic Telecom and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citic Telecom and China Communications
The main advantage of trading using opposite Citic Telecom and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Telecom position performs unexpectedly, China 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 China Communications will offset losses from the drop in China Communications' long position.| Citic Telecom vs. AUSTEVOLL SEAFOOD | Citic Telecom vs. CVW CLEANTECH INC | Citic Telecom vs. Performance Food Group | Citic Telecom vs. CAREER EDUCATION |
| China Communications vs. AVITA Medical | China Communications vs. TRADEGATE | China Communications vs. Merit Medical Systems | China Communications vs. SAFETY MEDICAL PROD |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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