Correlation Between Zhongrun Resources and China Citic

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

By analyzing existing cross correlation between Zhongrun Resources Investment and China Citic Bank, you can compare the effects of market volatilities on Zhongrun Resources and China Citic 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 Zhongrun Resources with a short position of China Citic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zhongrun Resources and China Citic.

Diversification Opportunities for Zhongrun Resources and China Citic

0.45

Correlation Coefficient

Zhongrun Resources  China Citic

Very weak diversification

The 3 months correlation between Zhongrun and China is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Zhongrun Resources Investment and China Citic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Citic Bank and Zhongrun Resources 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 Zhongrun Resources Investment are associated (or correlated) with China Citic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Citic Bank has no effect on the direction of Zhongrun Resources i.e., Zhongrun Resources and China Citic go up and down completely randomly.

Pair Corralation between Zhongrun Resources and China Citic

Assuming the 90 days trading horizon Zhongrun Resources Investment is expected to generate 2.16 times more return on investment than China Citic. However, Zhongrun Resources is 2.16 times more volatile than China Citic Bank. It trades about 0.26 of its potential returns per unit of risk. China Citic Bank is currently generating about 0.04 per unit of risk. If you would invest  128.00  in Zhongrun Resources Investment on September 21, 2024 and sell it today you would earn a total of  214.00  from holding Zhongrun Resources Investment or generate 167.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.01%
Values	Daily Returns

Zhongrun Resources Investment  vs.  China Citic Bank

Zhongrun Resources

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongrun Resources Investment are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongrun Resources sustained solid returns over the last few months and may actually be approaching a breakup point.

China Citic Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Citic Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Citic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zhongrun Resources and China Citic

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

The idea behind Zhongrun Resources Investment and China Citic Bank 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.