Correlation Between CITIC Telecom and United Insurance

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

Diversification Opportunities for CITIC Telecom and United Insurance

-0.26

Correlation Coefficient

CITIC Telecom  United Insurance

Very good diversification

The 3 months correlation between CITIC and United is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings 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 United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and United Insurance go up and down completely randomly.

Pair Corralation between CITIC Telecom and United Insurance

Assuming the 90 days horizon CITIC Telecom International is expected to generate 1.78 times more return on investment than United Insurance. However, CITIC Telecom is 1.78 times more volatile than United Insurance Holdings. It trades about 0.07 of its potential returns per unit of risk. United Insurance Holdings is currently generating about -0.03 per unit of risk. If you would invest  24.00  in CITIC Telecom International on April 24, 2025 and sell it today you would earn a total of  3.00  from holding CITIC Telecom International or generate 12.5% return on investment over 90 days.

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

CITIC Telecom International  vs.  United Insurance Holdings

CITIC Telecom Intern

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Telecom International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITIC Telecom reported solid returns over the last few months and may actually be approaching a breakup point.

United Insurance Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Insurance 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 United Insurance

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

The idea behind CITIC Telecom International and United Insurance Holdings 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.