Correlation Between FORTEC Elektronik and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both FORTEC Elektronik 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 FORTEC Elektronik and Citic Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FORTEC Elektronik AG and Citic Telecom International, you can compare the effects of market volatilities on FORTEC Elektronik 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 FORTEC Elektronik with a short position of Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of FORTEC Elektronik and Citic Telecom.
Diversification Opportunities for FORTEC Elektronik and Citic Telecom
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between FORTEC and Citic is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding FORTEC Elektronik AG 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 FORTEC Elektronik 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 FORTEC Elektronik AG 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 FORTEC Elektronik i.e., FORTEC Elektronik and Citic Telecom go up and down completely randomly.
Pair Corralation between FORTEC Elektronik and Citic Telecom
Assuming the 90 days trading horizon FORTEC Elektronik AG is expected to generate 1.17 times more return on investment than Citic Telecom. However, FORTEC Elektronik is 1.17 times more volatile than Citic Telecom International. It trades about 0.08 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.01 per unit of risk. If you would invest 1,950 in FORTEC Elektronik AG on October 16, 2024 and sell it today you would earn a total of 50.00 from holding FORTEC Elektronik AG or generate 2.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FORTEC Elektronik AG vs. Citic Telecom International
Performance |
| Timeline |
| FORTEC Elektronik |
| Citic Telecom Intern |
FORTEC Elektronik and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FORTEC Elektronik and Citic Telecom
The main advantage of trading using opposite FORTEC Elektronik and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FORTEC Elektronik 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 FORTEC Elektronik AG 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.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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