Correlation Between CITIC Telecom and Peak Minerals

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

Diversification Opportunities for CITIC Telecom and Peak Minerals

0.26

Correlation Coefficient

CITIC Telecom  Peak Minerals

Modest diversification

The 3 months correlation between CITIC and Peak is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and Peak Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak Minerals Limited 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 Peak Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Minerals Limited has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and Peak Minerals go up and down completely randomly.

Pair Corralation between CITIC Telecom and Peak Minerals

Assuming the 90 days horizon CITIC Telecom is expected to generate 16.59 times less return on investment than Peak Minerals. But when comparing it to its historical volatility, CITIC Telecom International is 5.59 times less risky than Peak Minerals. It trades about 0.04 of its potential returns per unit of risk. Peak Minerals Limited is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.15  in Peak Minerals Limited on October 10, 2024 and sell it today you would earn a total of  0.25  from holding Peak Minerals Limited or generate 166.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

CITIC Telecom International  vs.  Peak Minerals Limited

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Peak Minerals Limited

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with CITIC Telecom and Peak Minerals

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

The idea behind CITIC Telecom International and Peak Minerals Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.