Correlation Between Citic Offshore and City Development

Can any of the company-specific risk be diversified away by investing in both Citic Offshore and City Development 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 Offshore and City Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citic Offshore Helicopter and City Development Environment, you can compare the effects of market volatilities on Citic Offshore and City Development 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 Offshore with a short position of City Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Offshore and City Development.

Diversification Opportunities for Citic Offshore and City Development

0.91

Correlation Coefficient

Citic Offshore  City Development

Almost no diversification

The 3 months correlation between Citic and City is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citic Offshore Helicopter and City Development Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Development Env and Citic Offshore 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 Offshore Helicopter are associated (or correlated) with City Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Development Env has no effect on the direction of Citic Offshore i.e., Citic Offshore and City Development go up and down completely randomly.

Pair Corralation between Citic Offshore and City Development

Assuming the 90 days trading horizon Citic Offshore Helicopter is expected to generate 2.04 times more return on investment than City Development. However, Citic Offshore is 2.04 times more volatile than City Development Environment. It trades about 0.06 of its potential returns per unit of risk. City Development Environment is currently generating about -0.02 per unit of risk. If you would invest  2,035  in Citic Offshore Helicopter on October 6, 2024 and sell it today you would earn a total of  247.00  from holding Citic Offshore Helicopter or generate 12.14% return on investment over 90 days.

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

Citic Offshore Helicopter  vs.  City Development Environment

Citic Offshore Helicopter

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Offshore Helicopter are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Offshore sustained solid returns over the last few months and may actually be approaching a breakup point.

City Development Env

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Development Environment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, City Development is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citic Offshore and City Development

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

The idea behind Citic Offshore Helicopter and City Development Environment 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.