Correlation Between Jiaozuo Wanfang and Citic Offshore

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

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

Diversification Opportunities for Jiaozuo Wanfang and Citic Offshore

0.27

Correlation Coefficient

Jiaozuo Wanfang  Citic Offshore

Modest diversification

The 3 months correlation between Jiaozuo and Citic is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Jiaozuo Wanfang Aluminum and Citic Offshore Helicopter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Offshore Helicopter and Jiaozuo Wanfang 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 Jiaozuo Wanfang Aluminum are associated (or correlated) with Citic Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Offshore Helicopter has no effect on the direction of Jiaozuo Wanfang i.e., Jiaozuo Wanfang and Citic Offshore go up and down completely randomly.

Pair Corralation between Jiaozuo Wanfang and Citic Offshore

Assuming the 90 days trading horizon Jiaozuo Wanfang Aluminum is expected to under-perform the Citic Offshore. But the stock apears to be less risky and, when comparing its historical volatility, Jiaozuo Wanfang Aluminum is 2.23 times less risky than Citic Offshore. The stock trades about -0.24 of its potential returns per unit of risk. The Citic Offshore Helicopter is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  2,730  in Citic Offshore Helicopter on October 6, 2024 and sell it today you would lose (448.00) from holding Citic Offshore Helicopter or give up 16.41% of portfolio value over 90 days.

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

Jiaozuo Wanfang Aluminum  vs.  Citic Offshore Helicopter

Jiaozuo Wanfang Aluminum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiaozuo Wanfang Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Jiaozuo Wanfang and Citic Offshore

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

The idea behind Jiaozuo Wanfang Aluminum and Citic Offshore Helicopter 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.