Correlation Between CITIC Telecom and Spacetalk

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

Diversification Opportunities for CITIC Telecom and Spacetalk

0.08

Correlation Coefficient

CITIC Telecom  Spacetalk

Significant diversification

The 3 months correlation between CITIC and Spacetalk is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and Spacetalk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spacetalk 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 Spacetalk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spacetalk has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and Spacetalk go up and down completely randomly.

Pair Corralation between CITIC Telecom and Spacetalk

Assuming the 90 days horizon CITIC Telecom is expected to generate 7.42 times less return on investment than Spacetalk. But when comparing it to its historical volatility, CITIC Telecom International is 5.42 times less risky than Spacetalk. It trades about 0.07 of its potential returns per unit of risk. Spacetalk is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Spacetalk on October 11, 2024 and sell it today you would lose (0.10) from holding Spacetalk or give up 1.0% of portfolio value over 90 days.

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

CITIC Telecom International  vs.  Spacetalk

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.

Spacetalk

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spacetalk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Spacetalk reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and Spacetalk

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

The idea behind CITIC Telecom International and Spacetalk 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.