Correlation Between Shenzhen MTC and China Citic

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

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

Diversification Opportunities for Shenzhen MTC and China Citic

0.4

Correlation Coefficient

Shenzhen MTC  China Citic

Very weak diversification

The 3 months correlation between Shenzhen and China is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Shenzhen MTC Co 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 Shenzhen MTC 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 Shenzhen MTC Co 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 Shenzhen MTC i.e., Shenzhen MTC and China Citic go up and down completely randomly.

Pair Corralation between Shenzhen MTC and China Citic

If you would invest  513.00  in Shenzhen MTC Co on September 5, 2024 and sell it today you would lose (1.00) from holding Shenzhen MTC Co or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

Shenzhen MTC Co  vs.  China Citic Bank

Shenzhen MTC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen MTC Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen MTC sustained solid returns over the last few months and may actually be approaching a breakup point.

China Citic Bank

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days China Citic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Shenzhen MTC and China Citic

The main advantage of trading using opposite Shenzhen MTC and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shenzhen MTC 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 Shenzhen MTC Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.