Correlation Between China Mobile and CITIC Metal

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

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

Diversification Opportunities for China Mobile and CITIC Metal

-0.18

Correlation Coefficient

China Mobile  CITIC Metal

Good diversification

The 3 months correlation between China and CITIC is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding China Mobile Limited and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and China Mobile 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 Mobile Limited 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 China Mobile i.e., China Mobile and CITIC Metal go up and down completely randomly.

Pair Corralation between China Mobile and CITIC Metal

Assuming the 90 days trading horizon China Mobile Limited is expected to generate 0.57 times more return on investment than CITIC Metal. However, China Mobile Limited is 1.77 times less risky than CITIC Metal. It trades about 0.07 of its potential returns per unit of risk. CITIC Metal Co is currently generating about 0.01 per unit of risk. If you would invest  9,220  in China Mobile Limited on September 28, 2024 and sell it today you would earn a total of  2,218  from holding China Mobile Limited or generate 24.06% return on investment over 90 days.

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

China Mobile Limited  vs.  CITIC Metal Co

China Mobile Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Mobile Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Mobile 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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with China Mobile and CITIC Metal

The main advantage of trading using opposite China Mobile and CITIC Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mobile 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 China Mobile Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.