Correlation Between Citic Telecom and EBay

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

Diversification Opportunities for Citic Telecom and EBay

0.11

Correlation Coefficient

Citic Telecom  EBay

Average diversification

The 3 months correlation between Citic and EBay is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and eBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eBay Inc has no effect on the direction of Citic Telecom i.e., Citic Telecom and EBay go up and down completely randomly.

Pair Corralation between Citic Telecom and EBay

Assuming the 90 days trading horizon Citic Telecom is expected to generate 1.85 times less return on investment than EBay. In addition to that, Citic Telecom is 1.1 times more volatile than eBay Inc. It trades about 0.01 of its total potential returns per unit of risk. eBay Inc is currently generating about 0.03 per unit of volatility. If you would invest  5,977  in eBay Inc on December 29, 2024 and sell it today you would earn a total of  148.00  from holding eBay Inc or generate 2.48% return on investment over 90 days.

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

Citic Telecom International  vs.  eBay Inc

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.

eBay Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in eBay Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, EBay is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citic Telecom and EBay

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

The idea behind Citic Telecom International and eBay Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.