Correlation Between CITIC Metal and Jiangxi Sunshine

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

Diversification Opportunities for CITIC Metal and Jiangxi Sunshine

0.15

Correlation Coefficient

CITIC Metal  Jiangxi Sunshine

Average diversification

The 3 months correlation between CITIC and Jiangxi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Jiangxi Sunshine Dairy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Sunshine Dairy 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 Jiangxi Sunshine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Sunshine Dairy has no effect on the direction of CITIC Metal i.e., CITIC Metal and Jiangxi Sunshine go up and down completely randomly.

Pair Corralation between CITIC Metal and Jiangxi Sunshine

Assuming the 90 days trading horizon CITIC Metal Co is expected to under-perform the Jiangxi Sunshine. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Metal Co is 2.42 times less risky than Jiangxi Sunshine. The stock trades about -0.34 of its potential returns per unit of risk. The Jiangxi Sunshine Dairy is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,170  in Jiangxi Sunshine Dairy on October 9, 2024 and sell it today you would lose (106.00) from holding Jiangxi Sunshine Dairy or give up 9.06% of portfolio value over 90 days.

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

CITIC Metal Co  vs.  Jiangxi Sunshine Dairy

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.

Jiangxi Sunshine Dairy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Sunshine Dairy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangxi Sunshine 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 Metal and Jiangxi Sunshine

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

The idea behind CITIC Metal Co and Jiangxi Sunshine Dairy 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.