Correlation Between CITIC Telecom and DBS GROUP

Can any of the company-specific risk be diversified away by investing in both CITIC Telecom and DBS GROUP 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 DBS GROUP 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 DBS GROUP ADR4, you can compare the effects of market volatilities on CITIC Telecom and DBS GROUP 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 DBS GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Telecom and DBS GROUP.

Diversification Opportunities for CITIC Telecom and DBS GROUP

0.38

Correlation Coefficient

CITIC Telecom  DBS GROUP

Weak diversification

The 3 months correlation between CITIC and DBS is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and DBS GROUP ADR4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS GROUP ADR4 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 DBS GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS GROUP ADR4 has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and DBS GROUP go up and down completely randomly.

Pair Corralation between CITIC Telecom and DBS GROUP

Assuming the 90 days horizon CITIC Telecom International is expected to under-perform the DBS GROUP. In addition to that, CITIC Telecom is 4.38 times more volatile than DBS GROUP ADR4. It trades about -0.11 of its total potential returns per unit of risk. DBS GROUP ADR4 is currently generating about 0.18 per unit of volatility. If you would invest  12,300  in DBS GROUP ADR4 on October 12, 2024 and sell it today you would earn a total of  300.00  from holding DBS GROUP ADR4 or generate 2.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

CITIC Telecom International  vs.  DBS GROUP ADR4

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.

DBS GROUP ADR4

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DBS GROUP ADR4 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DBS GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and DBS GROUP

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

The idea behind CITIC Telecom International and DBS GROUP ADR4 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.