Correlation Between China Citic and Vatti Corp

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

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

Diversification Opportunities for China Citic and Vatti Corp

0.77

Correlation Coefficient

China Citic  Vatti Corp

Poor diversification

The 3 months correlation between China and Vatti is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Vatti Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vatti Corp and China Citic 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 China Citic Bank are associated (or correlated) with Vatti Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vatti Corp has no effect on the direction of China Citic i.e., China Citic and Vatti Corp go up and down completely randomly.

Pair Corralation between China Citic and Vatti Corp

Assuming the 90 days trading horizon China Citic is expected to generate 1.52 times less return on investment than Vatti Corp. But when comparing it to its historical volatility, China Citic Bank is 1.37 times less risky than Vatti Corp. It trades about 0.06 of its potential returns per unit of risk. Vatti Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Vatti Corp on September 24, 2024 and sell it today you would earn a total of  69.00  from holding Vatti Corp or generate 10.07% return on investment over 90 days.

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

China Citic Bank  vs.  Vatti Corp

China Citic Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Citic Bank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Citic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vatti Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vatti Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vatti Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with China Citic and Vatti Corp

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

The idea behind China Citic Bank and Vatti Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.