Correlation Between CITIC Metal and Chongqing Shunbo

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

Diversification Opportunities for CITIC Metal and Chongqing Shunbo

0.78

Correlation Coefficient

CITIC Metal  Chongqing Shunbo

Poor diversification

The 3 months correlation between CITIC and Chongqing is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Chongqing Shunbo Aluminum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Shunbo Aluminum 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 Chongqing Shunbo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Shunbo Aluminum has no effect on the direction of CITIC Metal i.e., CITIC Metal and Chongqing Shunbo go up and down completely randomly.

Pair Corralation between CITIC Metal and Chongqing Shunbo

Assuming the 90 days trading horizon CITIC Metal Co is expected to generate 0.67 times more return on investment than Chongqing Shunbo. However, CITIC Metal Co is 1.49 times less risky than Chongqing Shunbo. It trades about 0.08 of its potential returns per unit of risk. Chongqing Shunbo Aluminum is currently generating about 0.04 per unit of risk. If you would invest  750.00  in CITIC Metal Co on December 26, 2024 and sell it today you would earn a total of  34.00  from holding CITIC Metal Co or generate 4.53% 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.  Chongqing Shunbo Aluminum

CITIC Metal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Metal Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Chongqing Shunbo Aluminum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Shunbo Aluminum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Chongqing Shunbo 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 Chongqing Shunbo

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

The idea behind CITIC Metal Co and Chongqing Shunbo Aluminum 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.