Correlation Between CITIC Metal and Shanghai Jinfeng

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

Diversification Opportunities for CITIC Metal and Shanghai Jinfeng

0.4

Correlation Coefficient

CITIC Metal  Shanghai Jinfeng

Very weak diversification

The 3 months correlation between CITIC and Shanghai is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Shanghai Jinfeng Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Jinfeng Wine 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 Shanghai Jinfeng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Jinfeng Wine has no effect on the direction of CITIC Metal i.e., CITIC Metal and Shanghai Jinfeng go up and down completely randomly.

Pair Corralation between CITIC Metal and Shanghai Jinfeng

Assuming the 90 days trading horizon CITIC Metal Co is expected to under-perform the Shanghai Jinfeng. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Metal Co is 3.89 times less risky than Shanghai Jinfeng. The stock trades about -0.11 of its potential returns per unit of risk. The Shanghai Jinfeng Wine is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  575.00  in Shanghai Jinfeng Wine on September 27, 2024 and sell it today you would lose (15.00) from holding Shanghai Jinfeng Wine or give up 2.61% of portfolio value over 90 days.

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

CITIC Metal Co  vs.  Shanghai Jinfeng Wine

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.

Shanghai Jinfeng Wine

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shanghai Jinfeng Wine are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shanghai Jinfeng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Metal and Shanghai Jinfeng

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

The idea behind CITIC Metal Co and Shanghai Jinfeng Wine 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.