Correlation Between Runjian Communication and China Citic

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

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

Diversification Opportunities for Runjian Communication and China Citic

0.65

Correlation Coefficient

Runjian Communication  China Citic

Poor diversification

The 3 months correlation between Runjian and China is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Runjian Communication 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 Runjian Communication 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 Runjian Communication 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 Runjian Communication i.e., Runjian Communication and China Citic go up and down completely randomly.

Pair Corralation between Runjian Communication and China Citic

Assuming the 90 days trading horizon Runjian Communication Co is expected to generate 1.53 times more return on investment than China Citic. However, Runjian Communication is 1.53 times more volatile than China Citic Bank. It trades about 0.06 of its potential returns per unit of risk. China Citic Bank is currently generating about 0.02 per unit of risk. If you would invest  2,904  in Runjian Communication Co on September 29, 2024 and sell it today you would earn a total of  526.00  from holding Runjian Communication Co or generate 18.11% return on investment over 90 days.

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

Runjian Communication Co  vs.  China Citic Bank

Runjian Communication

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Runjian Communication Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Runjian Communication may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Runjian Communication and China Citic

The main advantage of trading using opposite Runjian Communication and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Runjian Communication 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 Runjian Communication 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.