Correlation Between Citic Offshore and Gansu Jiu

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

Diversification Opportunities for Citic Offshore and Gansu Jiu

0.75

Correlation Coefficient

Citic Offshore  Gansu Jiu

Poor diversification

The 3 months correlation between Citic and Gansu is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Citic Offshore Helicopter and Gansu Jiu Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gansu Jiu Steel 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 Gansu Jiu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gansu Jiu Steel has no effect on the direction of Citic Offshore i.e., Citic Offshore and Gansu Jiu go up and down completely randomly.

Pair Corralation between Citic Offshore and Gansu Jiu

Assuming the 90 days trading horizon Citic Offshore Helicopter is expected to generate 1.57 times more return on investment than Gansu Jiu. However, Citic Offshore is 1.57 times more volatile than Gansu Jiu Steel. It trades about -0.24 of its potential returns per unit of risk. Gansu Jiu Steel is currently generating about -0.44 per unit of risk. If you would invest  2,711  in Citic Offshore Helicopter on October 11, 2024 and sell it today you would lose (465.00) from holding Citic Offshore Helicopter or give up 17.15% of portfolio value over 90 days.

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

Citic Offshore Helicopter  vs.  Gansu Jiu Steel

Citic Offshore Helicopter

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Offshore Helicopter are ranked lower than 9 (%) 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.

Gansu Jiu Steel

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gansu Jiu Steel are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Gansu Jiu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citic Offshore and Gansu Jiu

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

The idea behind Citic Offshore Helicopter and Gansu Jiu 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.