Correlation Between Inner Mongolia and CITIC Metal

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

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

Diversification Opportunities for Inner Mongolia and CITIC Metal

0.52

Correlation Coefficient

Inner Mongolia  CITIC Metal

Very weak diversification

The 3 months correlation between Inner and CITIC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Inner Mongolia BaoTou and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Inner Mongolia 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 Inner Mongolia BaoTou 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 Inner Mongolia i.e., Inner Mongolia and CITIC Metal go up and down completely randomly.

Pair Corralation between Inner Mongolia and CITIC Metal

Assuming the 90 days trading horizon Inner Mongolia BaoTou is expected to generate 1.67 times more return on investment than CITIC Metal. However, Inner Mongolia is 1.67 times more volatile than CITIC Metal Co. It trades about -0.2 of its potential returns per unit of risk. CITIC Metal Co is currently generating about -0.47 per unit of risk. If you would invest  197.00  in Inner Mongolia BaoTou on October 5, 2024 and sell it today you would lose (16.00) from holding Inner Mongolia BaoTou or give up 8.12% of portfolio value over 90 days.

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

Inner Mongolia BaoTou  vs.  CITIC Metal Co

Inner Mongolia BaoTou

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 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.

Pair Trading with Inner Mongolia and CITIC Metal

The main advantage of trading using opposite Inner Mongolia and CITIC Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inner Mongolia 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 Inner Mongolia BaoTou 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.