Correlation Between CITIC Metal and Shenyang Chemical

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

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

Diversification Opportunities for CITIC Metal and Shenyang Chemical

0.24

Correlation Coefficient

CITIC Metal  Shenyang Chemical

Modest diversification

The 3 months correlation between CITIC and Shenyang is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Shenyang Chemical Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenyang Chemical and CITIC Metal 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 Metal Co are associated (or correlated) with Shenyang Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenyang Chemical has no effect on the direction of CITIC Metal i.e., CITIC Metal and Shenyang Chemical go up and down completely randomly.

Pair Corralation between CITIC Metal and Shenyang Chemical

Assuming the 90 days trading horizon CITIC Metal Co is expected to under-perform the Shenyang Chemical. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Metal Co is 1.48 times less risky than Shenyang Chemical. The stock trades about -0.04 of its potential returns per unit of risk. The Shenyang Chemical Industry is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Shenyang Chemical Industry on October 9, 2024 and sell it today you would lose (58.00) from holding Shenyang Chemical Industry or give up 15.06% of portfolio value over 90 days.

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

CITIC Metal Co  vs.  Shenyang Chemical Industry

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 somewhat strong basic indicators, CITIC Metal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shenyang Chemical

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenyang Chemical Industry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenyang Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CITIC Metal and Shenyang Chemical

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

The idea behind CITIC Metal Co and Shenyang Chemical Industry 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 Global Correlations module to find global opportunities by holding instruments from different markets.