Correlation Between Citic Telecom and PRECISION DRILLING

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

Diversification Opportunities for Citic Telecom and PRECISION DRILLING

0.19

Correlation Coefficient

Citic Telecom  PRECISION DRILLING

Average diversification

The 3 months correlation between Citic and PRECISION is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING 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 PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of Citic Telecom i.e., Citic Telecom and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between Citic Telecom and PRECISION DRILLING

Assuming the 90 days trading horizon Citic Telecom International is expected to generate 0.84 times more return on investment than PRECISION DRILLING. However, Citic Telecom International is 1.19 times less risky than PRECISION DRILLING. It trades about 0.01 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about -0.27 per unit of risk. If you would invest  27.00  in Citic Telecom International on September 28, 2024 and sell it today you would earn a total of  0.00  from holding Citic Telecom International or generate 0.0% 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.  PRECISION DRILLING P

Citic Telecom Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citic Telecom International has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

PRECISION DRILLING

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PRECISION DRILLING P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, PRECISION DRILLING is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citic Telecom and PRECISION DRILLING

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

The idea behind Citic Telecom International and PRECISION DRILLING P 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.