Correlation Between Citic Telecom and UNITED RENTALS
Can any of the company-specific risk be diversified away by investing in both Citic Telecom and UNITED RENTALS 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 UNITED RENTALS 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 UNITED RENTALS, you can compare the effects of market volatilities on Citic Telecom and UNITED RENTALS 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 UNITED RENTALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Telecom and UNITED RENTALS.
Diversification Opportunities for Citic Telecom and UNITED RENTALS
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citic and UNITED is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and UNITED RENTALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED RENTALS 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 UNITED RENTALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED RENTALS has no effect on the direction of Citic Telecom i.e., Citic Telecom and UNITED RENTALS go up and down completely randomly.
Pair Corralation between Citic Telecom and UNITED RENTALS
Assuming the 90 days trading horizon Citic Telecom is expected to generate 2.26 times less return on investment than UNITED RENTALS. But when comparing it to its historical volatility, Citic Telecom International is 1.18 times less risky than UNITED RENTALS. It trades about 0.09 of its potential returns per unit of risk. UNITED RENTALS is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 74,970 in UNITED RENTALS on August 29, 2024 and sell it today you would earn a total of 7,050 from holding UNITED RENTALS or generate 9.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citic Telecom International vs. UNITED RENTALS
Performance |
| Timeline |
| Citic Telecom Intern |
| UNITED RENTALS |
Citic Telecom and UNITED RENTALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citic Telecom and UNITED RENTALS
The main advantage of trading using opposite Citic Telecom and UNITED RENTALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Telecom position performs unexpectedly, UNITED RENTALS 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 UNITED RENTALS will offset losses from the drop in UNITED RENTALS's long position.| Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc | Citic Telecom vs. Apple Inc |
| UNITED RENTALS vs. Laureate Education | UNITED RENTALS vs. Darden Restaurants | UNITED RENTALS vs. MEDICAL FACILITIES NEW | UNITED RENTALS vs. ScanSource |
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.
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