Correlation Between CITIC Metal and Shenzhen Mindray

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

Diversification Opportunities for CITIC Metal and Shenzhen Mindray

0.68

Correlation Coefficient

CITIC Metal  Shenzhen Mindray

Poor diversification

The 3 months correlation between CITIC and Shenzhen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Shenzhen Mindray Bio Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Mindray Bio 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 Shenzhen Mindray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Mindray Bio has no effect on the direction of CITIC Metal i.e., CITIC Metal and Shenzhen Mindray go up and down completely randomly.

Pair Corralation between CITIC Metal and Shenzhen Mindray

Assuming the 90 days trading horizon CITIC Metal Co is expected to generate 0.66 times more return on investment than Shenzhen Mindray. However, CITIC Metal Co is 1.52 times less risky than Shenzhen Mindray. It trades about 0.04 of its potential returns per unit of risk. Shenzhen Mindray Bio Medical is currently generating about -0.01 per unit of risk. If you would invest  677.00  in CITIC Metal Co on October 4, 2024 and sell it today you would earn a total of  49.00  from holding CITIC Metal Co or generate 7.24% 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.  Shenzhen Mindray Bio Medical

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Shenzhen Mindray Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Mindray Bio Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CITIC Metal and Shenzhen Mindray

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

The idea behind CITIC Metal Co and Shenzhen Mindray Bio Medical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.