Correlation Between Shantou Wanshun and CITIC Metal

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

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

Diversification Opportunities for Shantou Wanshun and CITIC Metal

0.85

Correlation Coefficient

Shantou Wanshun  CITIC Metal

Very poor diversification

The 3 months correlation between Shantou and CITIC is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Shantou Wanshun 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 Shantou Wanshun Package 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 Shantou Wanshun i.e., Shantou Wanshun and CITIC Metal go up and down completely randomly.

Pair Corralation between Shantou Wanshun and CITIC Metal

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to under-perform the CITIC Metal. In addition to that, Shantou Wanshun is 1.79 times more volatile than CITIC Metal Co. It trades about -0.27 of its total potential returns per unit of risk. CITIC Metal Co is currently generating about -0.1 per unit of volatility. If you would invest  771.00  in CITIC Metal Co on September 27, 2024 and sell it today you would lose (21.00) from holding CITIC Metal Co or give up 2.72% of portfolio value over 90 days.

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

Shantou Wanshun Package  vs.  CITIC Metal Co

Shantou Wanshun Package

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shantou Wanshun Package are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantou Wanshun sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Shantou Wanshun and CITIC Metal

The main advantage of trading using opposite Shantou Wanshun and CITIC Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shantou Wanshun 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 Shantou Wanshun Package 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.