Correlation Between Citic Telecom and CBRE Group

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

Diversification Opportunities for Citic Telecom and CBRE Group

0.58

Correlation Coefficient

Citic Telecom  CBRE Group

Very weak diversification

The 3 months correlation between Citic and CBRE is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International and CBRE Group Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBRE Group Class 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 CBRE Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBRE Group Class has no effect on the direction of Citic Telecom i.e., Citic Telecom and CBRE Group go up and down completely randomly.

Pair Corralation between Citic Telecom and CBRE Group

Assuming the 90 days trading horizon Citic Telecom International is expected to generate 4.88 times more return on investment than CBRE Group. However, Citic Telecom is 4.88 times more volatile than CBRE Group Class. It trades about 0.07 of its potential returns per unit of risk. CBRE Group Class is currently generating about 0.13 per unit of risk. If you would invest  11.00  in Citic Telecom International on September 4, 2024 and sell it today you would earn a total of  16.00  from holding Citic Telecom International or generate 145.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Citic Telecom International  vs.  CBRE Group Class

Citic Telecom Intern

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Telecom International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Citic Telecom unveiled solid returns over the last few months and may actually be approaching a breakup point.

CBRE Group Class

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CBRE Group Class are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CBRE Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Telecom and CBRE Group

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

The idea behind Citic Telecom International and CBRE Group Class 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.

Check out your portfolio center.

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.