Correlation Between CITIC Metal and Zhongshan Broad

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

Diversification Opportunities for CITIC Metal and Zhongshan Broad

0.76

Correlation Coefficient

CITIC Metal  Zhongshan Broad

Poor diversification

The 3 months correlation between CITIC and Zhongshan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Zhongshan Broad Ocean Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Broad Ocean 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 Zhongshan Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Broad Ocean has no effect on the direction of CITIC Metal i.e., CITIC Metal and Zhongshan Broad go up and down completely randomly.

Pair Corralation between CITIC Metal and Zhongshan Broad

Assuming the 90 days trading horizon CITIC Metal Co is expected to under-perform the Zhongshan Broad. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Metal Co is 1.62 times less risky than Zhongshan Broad. The stock trades about -0.17 of its potential returns per unit of risk. The Zhongshan Broad Ocean Motor is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  547.00  in Zhongshan Broad Ocean Motor on September 28, 2024 and sell it today you would earn a total of  36.00  from holding Zhongshan Broad Ocean Motor or generate 6.58% 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.  Zhongshan Broad Ocean Motor

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.

Zhongshan Broad Ocean

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Broad Ocean Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Broad may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CITIC Metal and Zhongshan Broad

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

The idea behind CITIC Metal Co and Zhongshan Broad Ocean Motor 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.