Correlation Between CITIC Telecom and INTER CARS

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

Diversification Opportunities for CITIC Telecom and INTER CARS

0.68

Correlation Coefficient

CITIC Telecom  INTER CARS

Poor diversification

The 3 months correlation between CITIC and INTER is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and INTER CARS go up and down completely randomly.

Pair Corralation between CITIC Telecom and INTER CARS

Assuming the 90 days horizon CITIC Telecom International is expected to generate 2.09 times more return on investment than INTER CARS. However, CITIC Telecom is 2.09 times more volatile than INTER CARS SA. It trades about -0.02 of its potential returns per unit of risk. INTER CARS SA is currently generating about -0.05 per unit of risk. If you would invest  27.00  in CITIC Telecom International on January 20, 2025 and sell it today you would lose (3.00) from holding CITIC Telecom International or give up 11.11% of portfolio value over 90 days.

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

CITIC Telecom International  vs.  INTER CARS SA

CITIC Telecom Intern

Risk-Adjusted Performance

Very Weak

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

INTER CARS SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days INTER CARS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CITIC Telecom and INTER CARS

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

The idea behind CITIC Telecom International and INTER CARS SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.