Correlation Between CITIC Metal and Tianshui Huatian

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

Diversification Opportunities for CITIC Metal and Tianshui Huatian

0.62

Correlation Coefficient

CITIC Metal  Tianshui Huatian

Poor diversification

The 3 months correlation between CITIC and Tianshui is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec 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 Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of CITIC Metal i.e., CITIC Metal and Tianshui Huatian go up and down completely randomly.

Pair Corralation between CITIC Metal and Tianshui Huatian

Assuming the 90 days trading horizon CITIC Metal is expected to generate 10.92 times less return on investment than Tianshui Huatian. But when comparing it to its historical volatility, CITIC Metal Co is 1.4 times less risky than Tianshui Huatian. It trades about 0.02 of its potential returns per unit of risk. Tianshui Huatian Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  583.00  in Tianshui Huatian Technology on October 2, 2024 and sell it today you would earn a total of  652.00  from holding Tianshui Huatian Technology or generate 111.84% return on investment over 90 days.

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

CITIC Metal Co  vs.  Tianshui Huatian Technology

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.

Tianshui Huatian Tec

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshui Huatian Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshui Huatian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Metal and Tianshui Huatian

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

The idea behind CITIC Metal Co and Tianshui Huatian Technology 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.