Correlation Between CITIC Telecom and Rocket Internet

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

Diversification Opportunities for CITIC Telecom and Rocket Internet

0.21

Correlation Coefficient

CITIC Telecom  Rocket Internet

Modest diversification

The 3 months correlation between CITIC and Rocket is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and Rocket Internet SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocket Internet SE 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 Rocket Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocket Internet SE has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and Rocket Internet go up and down completely randomly.

Pair Corralation between CITIC Telecom and Rocket Internet

Assuming the 90 days horizon CITIC Telecom International is expected to generate 1.13 times more return on investment than Rocket Internet. However, CITIC Telecom is 1.13 times more volatile than Rocket Internet SE. It trades about -0.09 of its potential returns per unit of risk. Rocket Internet SE is currently generating about -0.11 per unit of risk. If you would invest  27.00  in CITIC Telecom International on October 26, 2024 and sell it today you would lose (1.00) from holding CITIC Telecom International or give up 3.7% of portfolio value over 90 days.

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

CITIC Telecom International  vs.  Rocket Internet SE

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.

Rocket Internet SE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CITIC Telecom and Rocket Internet

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

The idea behind CITIC Telecom International and Rocket Internet SE 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.