Correlation Between Muyuan Foodstuff and CITIC Metal

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

By analyzing existing cross correlation between Muyuan Foodstuff Co and CITIC Metal Co, you can compare the effects of market volatilities on Muyuan Foodstuff and CITIC Metal 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 Muyuan Foodstuff with a short position of CITIC Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muyuan Foodstuff and CITIC Metal.

Diversification Opportunities for Muyuan Foodstuff and CITIC Metal

0.82

Correlation Coefficient

Muyuan Foodstuff  CITIC Metal

Very poor diversification

The 3 months correlation between Muyuan and CITIC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Muyuan Foodstuff Co and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Muyuan Foodstuff 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 Muyuan Foodstuff Co are associated (or correlated) with CITIC Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Metal has no effect on the direction of Muyuan Foodstuff i.e., Muyuan Foodstuff and CITIC Metal go up and down completely randomly.

Pair Corralation between Muyuan Foodstuff and CITIC Metal

Assuming the 90 days trading horizon Muyuan Foodstuff Co is expected to under-perform the CITIC Metal. In addition to that, Muyuan Foodstuff is 1.16 times more volatile than CITIC Metal Co. It trades about -0.05 of its total potential returns per unit of risk. CITIC Metal Co is currently generating about 0.04 per unit of volatility. If you would invest  693.00  in CITIC Metal Co on September 27, 2024 and sell it today you would earn a total of  57.00  from holding CITIC Metal Co or generate 8.23% return on investment over 90 days.

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

Muyuan Foodstuff Co  vs.  CITIC Metal Co

Muyuan Foodstuff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Muyuan Foodstuff Co 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 Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Muyuan Foodstuff and CITIC Metal

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

The idea behind Muyuan Foodstuff Co and CITIC Metal Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.