Correlation Between CITIC Metal and Changjiang Jinggong

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

Diversification Opportunities for CITIC Metal and Changjiang Jinggong

0.81

Correlation Coefficient

CITIC Metal  Changjiang Jinggong

Very poor diversification

The 3 months correlation between CITIC and Changjiang is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Changjiang Jinggong Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changjiang Jinggong Steel 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 Changjiang Jinggong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changjiang Jinggong Steel has no effect on the direction of CITIC Metal i.e., CITIC Metal and Changjiang Jinggong go up and down completely randomly.

Pair Corralation between CITIC Metal and Changjiang Jinggong

Assuming the 90 days trading horizon CITIC Metal is expected to generate 2.03 times less return on investment than Changjiang Jinggong. But when comparing it to its historical volatility, CITIC Metal Co is 1.22 times less risky than Changjiang Jinggong. It trades about 0.08 of its potential returns per unit of risk. Changjiang Jinggong Steel is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  301.00  in Changjiang Jinggong Steel on December 26, 2024 and sell it today you would earn a total of  29.00  from holding Changjiang Jinggong Steel or generate 9.63% return on investment over 90 days.

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

CITIC Metal Co  vs.  Changjiang Jinggong Steel

CITIC Metal

Risk-Adjusted Performance

Modest

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.

Changjiang Jinggong Steel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Changjiang Jinggong Steel are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changjiang Jinggong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CITIC Metal and Changjiang Jinggong

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

The idea behind CITIC Metal Co and Changjiang Jinggong Steel 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.