Correlation Between CITIC Telecom and Japan Steel

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

Diversification Opportunities for CITIC Telecom and Japan Steel

0.47

Correlation Coefficient

CITIC Telecom  Japan Steel

Very weak diversification

The 3 months correlation between CITIC and Japan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Telecom International and The Japan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Steel 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 Japan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Steel has no effect on the direction of CITIC Telecom i.e., CITIC Telecom and Japan Steel go up and down completely randomly.

Pair Corralation between CITIC Telecom and Japan Steel

Assuming the 90 days horizon CITIC Telecom is expected to generate 1.56 times less return on investment than Japan Steel. In addition to that, CITIC Telecom is 1.32 times more volatile than The Japan Steel. It trades about 0.09 of its total potential returns per unit of risk. The Japan Steel is currently generating about 0.18 per unit of volatility. If you would invest  3,620  in The Japan Steel on April 21, 2025 and sell it today you would earn a total of  1,240  from holding The Japan Steel or generate 34.25% return on investment over 90 days.

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

CITIC Telecom International  vs.  The Japan Steel

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.

Japan Steel

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Japan Steel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Telecom and Japan Steel

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

The idea behind CITIC Telecom International and The Japan Steel 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.