Correlation Between Northern Data and Citic Telecom

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Can any of the company-specific risk be diversified away by investing in both Northern Data and Citic Telecom 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 Northern Data and Citic Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Data AG and Citic Telecom International, you can compare the effects of market volatilities on Northern Data and Citic Telecom 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 Northern Data with a short position of Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Data and Citic Telecom.

Diversification Opportunities for Northern Data and Citic Telecom

NorthernCiticDiversified AwayNorthernCiticDiversified Away100%
0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Northern and Citic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Northern Data AG and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern and Northern Data 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 Northern Data AG are associated (or correlated) with Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of Northern Data i.e., Northern Data and Citic Telecom go up and down completely randomly.

Pair Corralation between Northern Data and Citic Telecom

Assuming the 90 days trading horizon Northern Data AG is expected to generate 1.2 times more return on investment than Citic Telecom. However, Northern Data is 1.2 times more volatile than Citic Telecom International. It trades about 0.18 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.01 per unit of risk. If you would invest  3,430  in Northern Data AG on November 19, 2024 and sell it today you would earn a total of  1,290  from holding Northern Data AG or generate 37.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Northern Data AG  vs.  Citic Telecom International

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 20406080
JavaScript chart by amCharts 3.21.15NB2 B7O
       Timeline  
Northern Data AG 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Northern Data AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Northern Data unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb35404550
Citic Telecom Intern 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
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 current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.260.2650.270.2750.280.2850.29

Northern Data and Citic Telecom Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-11.2-8.39-5.58-2.770.03.056.219.3612.5215.68 0.010.020.030.04
JavaScript chart by amCharts 3.21.15NB2 B7O
       Returns  

Pair Trading with Northern Data and Citic Telecom

The main advantage of trading using opposite Northern Data and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Data position performs unexpectedly, Citic Telecom 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 Citic Telecom will offset losses from the drop in Citic Telecom's long position.
The idea behind Northern Data AG and Citic Telecom International 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 Valuation module to check real value of public entities based on technical and fundamental data.

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