Correlation Between AVIC Fund and China Citic

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

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

Diversification Opportunities for AVIC Fund and China Citic

0.43

Correlation Coefficient

AVIC Fund  China Citic

Very weak diversification

The 3 months correlation between AVIC and China is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding AVIC Fund Management 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 AVIC Fund 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 AVIC Fund Management 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 AVIC Fund i.e., AVIC Fund and China Citic go up and down completely randomly.

Pair Corralation between AVIC Fund and China Citic

Assuming the 90 days trading horizon AVIC Fund is expected to generate 1.32 times less return on investment than China Citic. But when comparing it to its historical volatility, AVIC Fund Management is 4.55 times less risky than China Citic. It trades about 0.17 of its potential returns per unit of risk. China Citic Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  638.00  in China Citic Bank on October 4, 2024 and sell it today you would earn a total of  60.00  from holding China Citic Bank or generate 9.4% return on investment over 90 days.

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

AVIC Fund Management  vs.  China Citic Bank

AVIC Fund Management

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVIC Fund Management are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AVIC Fund may actually be approaching a critical reversion point that can send shares even higher in February 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 AVIC Fund and China Citic

The main advantage of trading using opposite AVIC Fund and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVIC Fund 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 AVIC Fund Management 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.