Correlation Between CITIC Metal and Shantou Wanshun

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

Diversification Opportunities for CITIC Metal and Shantou Wanshun

0.85

Correlation Coefficient

CITIC Metal  Shantou Wanshun

Very poor diversification

The 3 months correlation between CITIC and Shantou is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Shantou Wanshun Package in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shantou Wanshun Package 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 Shantou Wanshun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shantou Wanshun Package has no effect on the direction of CITIC Metal i.e., CITIC Metal and Shantou Wanshun go up and down completely randomly.

Pair Corralation between CITIC Metal and Shantou Wanshun

Assuming the 90 days trading horizon CITIC Metal Co is expected to generate 0.56 times more return on investment than Shantou Wanshun. However, CITIC Metal Co is 1.79 times less risky than Shantou Wanshun. It trades about -0.1 of its potential returns per unit of risk. Shantou Wanshun Package is currently generating about -0.27 per unit of risk. If you would invest  771.00  in CITIC Metal Co on September 27, 2024 and sell it today you would lose (21.00) from holding CITIC Metal Co or give up 2.72% of portfolio value over 90 days.

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

CITIC Metal Co  vs.  Shantou Wanshun Package

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.

Shantou Wanshun Package

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shantou Wanshun Package are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shantou Wanshun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Metal and Shantou Wanshun

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

The idea behind CITIC Metal Co and Shantou Wanshun Package 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..