Correlation Between Citic Telecom and AP Møller

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

Diversification Opportunities for Citic Telecom and AP Møller

0.64

Correlation Coefficient

Citic Telecom  AP Møller

Poor diversification

The 3 months correlation between Citic and DP4A is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Citic Telecom i.e., Citic Telecom and AP Møller go up and down completely randomly.

Pair Corralation between Citic Telecom and AP Møller

Assuming the 90 days trading horizon Citic Telecom is expected to generate 5.49 times less return on investment than AP Møller. In addition to that, Citic Telecom is 1.05 times more volatile than AP Mller . It trades about 0.01 of its total potential returns per unit of risk. AP Mller is currently generating about 0.08 per unit of volatility. If you would invest  136,867  in AP Mller on December 21, 2024 and sell it today you would earn a total of  16,033  from holding AP Mller or generate 11.71% return on investment over 90 days.

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

Citic Telecom International  vs.  AP Mller

Citic Telecom Intern

Risk-Adjusted Performance

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. In spite of comparatively stable basic indicators, Citic Telecom is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AP Møller

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AP Mller are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AP Møller reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Telecom and AP Møller

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

The idea behind Citic Telecom International and AP Mller 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.