Correlation Between China Petroleum and CITIC Securities

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

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

Diversification Opportunities for China Petroleum and CITIC Securities

-0.15

Correlation Coefficient

China Petroleum  CITIC Securities

Good diversification

The 3 months correlation between China and CITIC is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding China Petroleum Chemical and CITIC Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Securities and China Petroleum 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 China Petroleum Chemical are associated (or correlated) with CITIC Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Securities has no effect on the direction of China Petroleum i.e., China Petroleum and CITIC Securities go up and down completely randomly.

Pair Corralation between China Petroleum and CITIC Securities

Assuming the 90 days trading horizon China Petroleum Chemical is expected to generate 0.46 times more return on investment than CITIC Securities. However, China Petroleum Chemical is 2.18 times less risky than CITIC Securities. It trades about 0.04 of its potential returns per unit of risk. CITIC Securities Co is currently generating about -0.05 per unit of risk. If you would invest  632.00  in China Petroleum Chemical on September 16, 2024 and sell it today you would earn a total of  4.00  from holding China Petroleum Chemical or generate 0.63% return on investment over 90 days.

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

China Petroleum Chemical  vs.  CITIC Securities Co

China Petroleum Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

CITIC Securities

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Securities Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Securities sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Petroleum and CITIC Securities

The main advantage of trading using opposite China Petroleum and CITIC Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Petroleum position performs unexpectedly, CITIC Securities 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 Securities will offset losses from the drop in CITIC Securities' long position.

The idea behind China Petroleum Chemical and CITIC Securities 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.