Correlation Between CITIC Telecom and ADHI KARYA

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

Diversification Opportunities for CITIC Telecom and ADHI KARYA

-0.25

Correlation Coefficient

CITIC Telecom  ADHI KARYA

Very good diversification

The 3 months correlation between CITIC and ADHI is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and ADHI KARYA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADHI KARYA 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 ADHI KARYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADHI KARYA has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and ADHI KARYA go up and down completely randomly.

Pair Corralation between CITIC Telecom and ADHI KARYA

Assuming the 90 days horizon CITIC Telecom is expected to generate 67.9 times less return on investment than ADHI KARYA. But when comparing it to its historical volatility, CITIC Telecom International is 6.53 times less risky than ADHI KARYA. It trades about 0.01 of its potential returns per unit of risk. ADHI KARYA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.85  in ADHI KARYA on December 25, 2024 and sell it today you would lose (0.40) from holding ADHI KARYA or give up 47.06% of portfolio value over 90 days.

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

CITIC Telecom International  vs.  ADHI KARYA

CITIC Telecom Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Telecom International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CITIC Telecom is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

ADHI KARYA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADHI KARYA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, ADHI KARYA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and ADHI KARYA

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

The idea behind CITIC Telecom International and ADHI KARYA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.