Correlation Between CITIC Telecom and State Street

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

Diversification Opportunities for CITIC Telecom and State Street

-0.15

Correlation Coefficient

CITIC Telecom  State Street

Good diversification

The 3 months correlation between CITIC and State is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and State Street in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and State Street go up and down completely randomly.

Pair Corralation between CITIC Telecom and State Street

Assuming the 90 days horizon CITIC Telecom International is expected to generate 2.8 times more return on investment than State Street. However, CITIC Telecom is 2.8 times more volatile than State Street. It trades about -0.02 of its potential returns per unit of risk. State Street is currently generating about -0.12 per unit of risk. If you would invest  29.00  in CITIC Telecom International on December 20, 2024 and sell it today you would lose (3.00) from holding CITIC Telecom International or give up 10.34% 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.  State Street

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.

State Street

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Street has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CITIC Telecom and State Street

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

The idea behind CITIC Telecom International and State Street 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.