Correlation Between CITIC Telecom and SOFI TECHNOLOGIES

Can any of the company-specific risk be diversified away by investing in both CITIC Telecom and SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES, you can compare the effects of market volatilities on CITIC Telecom and SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Telecom and SOFI TECHNOLOGIES.

Diversification Opportunities for CITIC Telecom and SOFI TECHNOLOGIES

0.36

Correlation Coefficient

CITIC Telecom  SOFI TECHNOLOGIES

Weak diversification

The 3 months correlation between CITIC and SOFI is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between CITIC Telecom and SOFI TECHNOLOGIES

Assuming the 90 days horizon CITIC Telecom International is expected to generate 1.88 times more return on investment than SOFI TECHNOLOGIES. However, CITIC Telecom is 1.88 times more volatile than SOFI TECHNOLOGIES. It trades about 0.07 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.07 per unit of risk. If you would invest  4.07  in CITIC Telecom International on October 11, 2024 and sell it today you would earn a total of  22.93  from holding CITIC Telecom International or generate 563.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

CITIC Telecom International  vs.  SOFI TECHNOLOGIES

CITIC Telecom Intern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CITIC Telecom is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and SOFI TECHNOLOGIES

The main advantage of trading using opposite CITIC Telecom and SOFI TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Telecom position performs unexpectedly, SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES will offset losses from the drop in SOFI TECHNOLOGIES's long position.

The idea behind CITIC Telecom International and SOFI TECHNOLOGIES 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.