Correlation Between CITIC Securities and China Petroleum

Can any of the company-specific risk be diversified away by investing in both CITIC Securities and China Petroleum 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 China Petroleum 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 China Petroleum Chemical, you can compare the effects of market volatilities on CITIC Securities and China Petroleum 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 China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Securities and China Petroleum.

Diversification Opportunities for CITIC Securities and China Petroleum

-0.14

Correlation Coefficient

CITIC Securities  China Petroleum

Good diversification

The 3 months correlation between CITIC and China is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Securities Co and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of CITIC Securities i.e., CITIC Securities and China Petroleum go up and down completely randomly.

Pair Corralation between CITIC Securities and China Petroleum

Assuming the 90 days trading horizon CITIC Securities Co is expected to generate 2.17 times more return on investment than China Petroleum. However, CITIC Securities is 2.17 times more volatile than China Petroleum Chemical. It trades about 0.23 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.02 per unit of risk. If you would invest  1,894  in CITIC Securities Co on September 18, 2024 and sell it today you would earn a total of  1,109  from holding CITIC Securities Co or generate 58.55% return on investment over 90 days.

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

CITIC Securities Co  vs.  China Petroleum Chemical

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.

China Petroleum Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Petroleum Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with CITIC Securities and China Petroleum

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

The idea behind CITIC Securities Co and China Petroleum Chemical 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.