Correlation Between CITIC Telecom and UNICREDIT SPA

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

Diversification Opportunities for CITIC Telecom and UNICREDIT SPA

0.74

Correlation Coefficient

CITIC Telecom  UNICREDIT SPA

Poor diversification

The 3 months correlation between CITIC and UNICREDIT is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and UNICREDIT SPA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICREDIT SPA ADR 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 UNICREDIT SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICREDIT SPA ADR has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and UNICREDIT SPA go up and down completely randomly.

Pair Corralation between CITIC Telecom and UNICREDIT SPA

Assuming the 90 days horizon CITIC Telecom is expected to generate 1.07 times less return on investment than UNICREDIT SPA. In addition to that, CITIC Telecom is 2.25 times more volatile than UNICREDIT SPA ADR. It trades about 0.09 of its total potential returns per unit of risk. UNICREDIT SPA ADR is currently generating about 0.21 per unit of volatility. If you would invest  2,328  in UNICREDIT SPA ADR on April 20, 2025 and sell it today you would earn a total of  552.00  from holding UNICREDIT SPA ADR or generate 23.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

CITIC Telecom International  vs.  UNICREDIT SPA ADR

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 6 (%) 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.

UNICREDIT SPA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, UNICREDIT SPA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and UNICREDIT SPA

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

The idea behind CITIC Telecom International and UNICREDIT SPA ADR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.