Correlation Between Industrial and Citic Offshore

Can any of the company-specific risk be diversified away by investing in both Industrial and Citic Offshore 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 Industrial and Citic Offshore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Industrial and Commercial and Citic Offshore Helicopter, you can compare the effects of market volatilities on Industrial and Citic Offshore 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 Industrial with a short position of Citic Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial and Citic Offshore.

Diversification Opportunities for Industrial and Citic Offshore

0.75

Correlation Coefficient

Industrial  Citic Offshore

Poor diversification

The 3 months correlation between Industrial and Citic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Citic Offshore Helicopter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Offshore Helicopter and Industrial 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 Industrial and Commercial are associated (or correlated) with Citic Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Offshore Helicopter has no effect on the direction of Industrial i.e., Industrial and Citic Offshore go up and down completely randomly.

Pair Corralation between Industrial and Citic Offshore

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.41 times more return on investment than Citic Offshore. However, Industrial and Commercial is 2.44 times less risky than Citic Offshore. It trades about -0.01 of its potential returns per unit of risk. Citic Offshore Helicopter is currently generating about -0.08 per unit of risk. If you would invest  695.00  in Industrial and Commercial on December 28, 2024 and sell it today you would lose (8.00) from holding Industrial and Commercial or give up 1.15% of portfolio value over 90 days.

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

Industrial and Commercial  vs.  Citic Offshore Helicopter

Industrial and Commercial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industrial and Commercial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citic Offshore Helicopter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citic Offshore Helicopter 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Industrial and Citic Offshore

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

The idea behind Industrial and Commercial and Citic Offshore Helicopter 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.