Correlation Between CITIC Telecom and Lenovo Group

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

Diversification Opportunities for CITIC Telecom and Lenovo Group

0.54

Correlation Coefficient

CITIC Telecom  Lenovo Group

Very weak diversification

The 3 months correlation between CITIC and Lenovo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and Lenovo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lenovo Group 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 Lenovo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lenovo Group Limited has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and Lenovo Group go up and down completely randomly.

Pair Corralation between CITIC Telecom and Lenovo Group

Assuming the 90 days horizon CITIC Telecom International is expected to under-perform the Lenovo Group. In addition to that, CITIC Telecom is 1.27 times more volatile than Lenovo Group Limited. It trades about -0.02 of its total potential returns per unit of risk. Lenovo Group Limited is currently generating about 0.11 per unit of volatility. If you would invest  116.00  in Lenovo Group Limited on December 20, 2024 and sell it today you would earn a total of  24.00  from holding Lenovo Group Limited or generate 20.69% return on investment over 90 days.

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

CITIC Telecom International  vs.  Lenovo Group Limited

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

Lenovo Group Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lenovo Group Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lenovo Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and Lenovo Group

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

The idea behind CITIC Telecom International and Lenovo Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.