Correlation Between China Minmetals and China Citic

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

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

Diversification Opportunities for China Minmetals and China Citic

-0.14

Correlation Coefficient

China Minmetals  China Citic

Good diversification

The 3 months correlation between China and China is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Minmetals Rare 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 China Minmetals 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 China Minmetals Rare 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 China Minmetals i.e., China Minmetals and China Citic go up and down completely randomly.

Pair Corralation between China Minmetals and China Citic

Assuming the 90 days trading horizon China Minmetals Rare is expected to under-perform the China Citic. In addition to that, China Minmetals is 1.88 times more volatile than China Citic Bank. It trades about -0.03 of its total potential returns per unit of risk. China Citic Bank is currently generating about -0.01 per unit of volatility. If you would invest  667.00  in China Citic Bank on October 26, 2024 and sell it today you would lose (7.00) from holding China Citic Bank or give up 1.05% of portfolio value over 90 days.

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

China Minmetals Rare  vs.  China Citic Bank

China Minmetals Rare

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Citic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Minmetals and China Citic

The main advantage of trading using opposite China Minmetals and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Minmetals 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 China Minmetals Rare 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.