Correlation Between Sino Platinum and China Citic

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

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

Diversification Opportunities for Sino Platinum and China Citic

0.37

Correlation Coefficient

Sino Platinum  China Citic

Weak diversification

The 3 months correlation between Sino and China is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sino Platinum Metals Co 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 Sino Platinum 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 Sino Platinum Metals Co 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 Sino Platinum i.e., Sino Platinum and China Citic go up and down completely randomly.

Pair Corralation between Sino Platinum and China Citic

Assuming the 90 days trading horizon Sino Platinum Metals Co is expected to under-perform the China Citic. But the stock apears to be less risky and, when comparing its historical volatility, Sino Platinum Metals Co is 1.32 times less risky than China Citic. The stock trades about -0.09 of its potential returns per unit of risk. The China Citic Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  680.00  in China Citic Bank on December 2, 2024 and sell it today you would earn a total of  10.00  from holding China Citic Bank or generate 1.47% return on investment over 90 days.

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

Sino Platinum Metals Co  vs.  China Citic Bank

Sino Platinum Metals

Risk-Adjusted Performance

Very Weak

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

China Citic Bank

Risk-Adjusted Performance

Weak

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

The main advantage of trading using opposite Sino Platinum and China Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino Platinum 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 Sino Platinum Metals Co 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.