Correlation Between DAIRY FARM and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both DAIRY FARM 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 DAIRY FARM and Citic Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DAIRY FARM INTL and Citic Telecom International, you can compare the effects of market volatilities on DAIRY FARM 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 DAIRY FARM with a short position of Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIRY FARM and Citic Telecom.
Diversification Opportunities for DAIRY FARM and Citic Telecom
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DAIRY and Citic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding DAIRY FARM INTL 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 DAIRY FARM 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 DAIRY FARM INTL 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 DAIRY FARM i.e., DAIRY FARM and Citic Telecom go up and down completely randomly.
Pair Corralation between DAIRY FARM and Citic Telecom
Assuming the 90 days trading horizon DAIRY FARM INTL is expected to generate 0.64 times more return on investment than Citic Telecom. However, DAIRY FARM INTL is 1.57 times less risky than Citic Telecom. It trades about 0.35 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.09 per unit of risk. If you would invest 216.00 in DAIRY FARM INTL on August 29, 2024 and sell it today you would earn a total of 24.00 from holding DAIRY FARM INTL or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DAIRY FARM INTL vs. Citic Telecom International
Performance |
| Timeline |
| DAIRY FARM INTL |
| Citic Telecom Intern |
DAIRY FARM and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DAIRY FARM and Citic Telecom
The main advantage of trading using opposite DAIRY FARM and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAIRY FARM 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.The idea behind DAIRY FARM INTL and Citic Telecom International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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