Correlation Between Citic Offshore and Xinjiang Baodi

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

Diversification Opportunities for Citic Offshore and Xinjiang Baodi

0.75

Correlation Coefficient

Citic Offshore  Xinjiang Baodi

Poor diversification

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

Pair Corralation between Citic Offshore and Xinjiang Baodi

Assuming the 90 days trading horizon Citic Offshore Helicopter is expected to under-perform the Xinjiang Baodi. In addition to that, Citic Offshore is 1.62 times more volatile than Xinjiang Baodi Mining. It trades about -0.08 of its total potential returns per unit of risk. Xinjiang Baodi Mining is currently generating about 0.11 per unit of volatility. If you would invest  674.00  in Xinjiang Baodi Mining on October 4, 2024 and sell it today you would earn a total of  26.00  from holding Xinjiang Baodi Mining or generate 3.86% return on investment over 90 days.

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

Citic Offshore Helicopter  vs.  Xinjiang Baodi Mining

Citic Offshore Helicopter

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Offshore Helicopter are ranked lower than 8 (%) 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.

Xinjiang Baodi Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Baodi Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xinjiang Baodi may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citic Offshore and Xinjiang Baodi

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

The idea behind Citic Offshore Helicopter and Xinjiang Baodi Mining 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.