Correlation Between Spirent Communications and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both Spirent Communications 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 Spirent Communications and Citic Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spirent Communications plc and Citic Telecom International, you can compare the effects of market volatilities on Spirent Communications 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 Spirent Communications with a short position of Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spirent Communications and Citic Telecom.
Diversification Opportunities for Spirent Communications and Citic Telecom
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spirent and Citic is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Spirent Communications plc 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 Spirent Communications 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 Spirent Communications plc 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 Spirent Communications i.e., Spirent Communications and Citic Telecom go up and down completely randomly.
Pair Corralation between Spirent Communications and Citic Telecom
Assuming the 90 days horizon Spirent Communications is expected to generate 7.53 times less return on investment than Citic Telecom. But when comparing it to its historical volatility, Spirent Communications plc is 2.51 times less risky than Citic Telecom. It trades about 0.03 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 25.00 in Citic Telecom International on August 26, 2024 and sell it today you would earn a total of 2.00 from holding Citic Telecom International or generate 8.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spirent Communications plc vs. Citic Telecom International
Performance |
| Timeline |
| Spirent Communications |
| Citic Telecom Intern |
Spirent Communications and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spirent Communications and Citic Telecom
The main advantage of trading using opposite Spirent Communications and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spirent Communications 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.| Spirent Communications vs. Cogent Communications Holdings | Spirent Communications vs. Xinhua Winshare Publishing | Spirent Communications vs. HEMISPHERE EGY | Spirent Communications vs. LG Display Co |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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