Correlation Between CITIC Securities and Tianjin Pengling

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

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

Diversification Opportunities for CITIC Securities and Tianjin Pengling

0.95

Correlation Coefficient

CITIC Securities  Tianjin Pengling

Almost no diversification

The 3 months correlation between CITIC and Tianjin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Securities Co and Tianjin Pengling Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Pengling Rubber and CITIC Securities 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 CITIC Securities Co are associated (or correlated) with Tianjin Pengling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Pengling Rubber has no effect on the direction of CITIC Securities i.e., CITIC Securities and Tianjin Pengling go up and down completely randomly.

Pair Corralation between CITIC Securities and Tianjin Pengling

Assuming the 90 days trading horizon CITIC Securities Co is expected to generate 0.96 times more return on investment than Tianjin Pengling. However, CITIC Securities Co is 1.04 times less risky than Tianjin Pengling. It trades about 0.25 of its potential returns per unit of risk. Tianjin Pengling Rubber is currently generating about 0.16 per unit of risk. If you would invest  1,898  in CITIC Securities Co on September 7, 2024 and sell it today you would earn a total of  1,192  from holding CITIC Securities Co or generate 62.8% return on investment over 90 days.

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

CITIC Securities Co  vs.  Tianjin Pengling Rubber

CITIC Securities

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Securities Co are ranked lower than 19 (%) 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.

Tianjin Pengling Rubber

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Pengling Rubber are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Pengling sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Securities and Tianjin Pengling

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

The idea behind CITIC Securities Co and Tianjin Pengling Rubber 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.