Correlation Between CIMC Vehicles and China Citic

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

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

Diversification Opportunities for CIMC Vehicles and China Citic

-0.04

Correlation Coefficient

CIMC Vehicles  China Citic

Good diversification

The 3 months correlation between CIMC and China is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CIMC Vehicles 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 CIMC Vehicles 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 CIMC Vehicles 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 CIMC Vehicles i.e., CIMC Vehicles and China Citic go up and down completely randomly.

Pair Corralation between CIMC Vehicles and China Citic

Assuming the 90 days trading horizon CIMC Vehicles Co is expected to under-perform the China Citic. But the stock apears to be less risky and, when comparing its historical volatility, CIMC Vehicles Co is 1.05 times less risky than China Citic. The stock trades about -0.39 of its potential returns per unit of risk. The China Citic Bank is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  711.00  in China Citic Bank on October 8, 2024 and sell it today you would lose (32.00) from holding China Citic Bank or give up 4.5% of portfolio value over 90 days.

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

CIMC Vehicles Co  vs.  China Citic Bank

CIMC Vehicles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMC Vehicles Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 CIMC Vehicles and China Citic

The main advantage of trading using opposite CIMC Vehicles and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CIMC Vehicles 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 CIMC Vehicles 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..