Correlation Between CITIC Metal and Great Sun

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

Diversification Opportunities for CITIC Metal and Great Sun

0.73

Correlation Coefficient

CITIC Metal  Great Sun

Poor diversification

The 3 months correlation between CITIC and Great is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Great Sun Foods Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Sun Foods 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 Great Sun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Sun Foods has no effect on the direction of CITIC Metal i.e., CITIC Metal and Great Sun go up and down completely randomly.

Pair Corralation between CITIC Metal and Great Sun

Assuming the 90 days trading horizon CITIC Metal Co is expected to generate 0.38 times more return on investment than Great Sun. However, CITIC Metal Co is 2.67 times less risky than Great Sun. It trades about -0.1 of its potential returns per unit of risk. Great Sun Foods Co is currently generating about -0.09 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	Significant
Accuracy	100.0%
Values	Daily Returns

CITIC Metal Co  vs.  Great Sun Foods Co

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.

Great Sun Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great Sun Foods Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Great Sun sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Metal and Great Sun

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

The idea behind CITIC Metal Co and Great Sun Foods Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.