Correlation Between CITIC Telecom and Dairy Farm

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

Diversification Opportunities for CITIC Telecom and Dairy Farm

0.63

Correlation Coefficient

CITIC Telecom  Dairy Farm

Poor diversification

The 3 months correlation between CITIC and Dairy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and Dairy Farm go up and down completely randomly.

Pair Corralation between CITIC Telecom and Dairy Farm

Assuming the 90 days horizon CITIC Telecom International is expected to generate 1.58 times more return on investment than Dairy Farm. However, CITIC Telecom is 1.58 times more volatile than Dairy Farm International. It trades about 0.07 of its potential returns per unit of risk. Dairy Farm International is currently generating about -0.01 per unit of risk. If you would invest  26.00  in CITIC Telecom International on September 15, 2024 and sell it today you would earn a total of  1.00  from holding CITIC Telecom International or generate 3.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CITIC Telecom International  vs.  Dairy Farm International

CITIC Telecom Intern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CITIC Telecom may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dairy Farm International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Dairy Farm reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and Dairy Farm

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

The idea behind CITIC Telecom International and Dairy Farm 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.