Correlation Between Highlight Communications and CITIC Telecom
Can any of the company-specific risk be diversified away by investing in both Highlight 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 Highlight 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 Highlight Communications AG and CITIC Telecom International, you can compare the effects of market volatilities on Highlight 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 Highlight Communications with a short position of CITIC Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and CITIC Telecom.
Diversification Opportunities for Highlight Communications and CITIC Telecom
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Highlight and CITIC is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications 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 Highlight 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 Highlight Communications 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 Highlight Communications i.e., Highlight Communications and CITIC Telecom go up and down completely randomly.
Pair Corralation between Highlight Communications and CITIC Telecom
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 2.6 times more return on investment than CITIC Telecom. However, Highlight Communications is 2.6 times more volatile than CITIC Telecom International. It trades about 0.23 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 114.00 in Highlight Communications AG on October 17, 2024 and sell it today you would earn a total of 34.00 from holding Highlight Communications AG or generate 29.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. CITIC Telecom International
Performance |
| Timeline |
| Highlight Communications |
| CITIC Telecom Intern |
Highlight Communications and CITIC Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and CITIC Telecom
The main advantage of trading using opposite Highlight Communications and CITIC Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight 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.The idea behind Highlight Communications 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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