Correlation Between Beijing Jiaman and China Citic

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

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

Diversification Opportunities for Beijing Jiaman and China Citic

0.57

Correlation Coefficient

Beijing Jiaman  China Citic

Very weak diversification

The 3 months correlation between Beijing and China is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Jiaman Dress 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 Beijing Jiaman 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 Beijing Jiaman Dress 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 Beijing Jiaman i.e., Beijing Jiaman and China Citic go up and down completely randomly.

Pair Corralation between Beijing Jiaman and China Citic

Assuming the 90 days trading horizon Beijing Jiaman Dress is expected to under-perform the China Citic. In addition to that, Beijing Jiaman is 1.6 times more volatile than China Citic Bank. It trades about -0.05 of its total potential returns per unit of risk. China Citic Bank is currently generating about -0.06 per unit of volatility. If you would invest  684.00  in China Citic Bank on November 28, 2024 and sell it today you would lose (34.00) from holding China Citic Bank or give up 4.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.28%
Values	Daily Returns

Beijing Jiaman Dress  vs.  China Citic Bank

Beijing Jiaman Dress

Risk-Adjusted Performance

Very Weak

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

China Citic Bank

Risk-Adjusted Performance

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 Beijing Jiaman and China Citic

The main advantage of trading using opposite Beijing Jiaman and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Jiaman 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 Beijing Jiaman Dress 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.