Correlation Between China Citic and Shenzhen Clou

Can any of the company-specific risk be diversified away by investing in both China Citic and Shenzhen Clou 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 Shenzhen Clou 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 Shenzhen Clou Electronics, you can compare the effects of market volatilities on China Citic and Shenzhen Clou 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 Shenzhen Clou. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Citic and Shenzhen Clou.

Diversification Opportunities for China Citic and Shenzhen Clou

0.4

Correlation Coefficient

China Citic  Shenzhen Clou

Very weak diversification

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

Pair Corralation between China Citic and Shenzhen Clou

Assuming the 90 days trading horizon China Citic Bank is expected to generate 0.71 times more return on investment than Shenzhen Clou. However, China Citic Bank is 1.41 times less risky than Shenzhen Clou. It trades about 0.05 of its potential returns per unit of risk. Shenzhen Clou Electronics is currently generating about -0.07 per unit of risk. If you would invest  480.00  in China Citic Bank on October 19, 2024 and sell it today you would earn a total of  195.00  from holding China Citic Bank or generate 40.63% return on investment over 90 days.

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

China Citic Bank  vs.  Shenzhen Clou Electronics

China Citic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Shenzhen Clou Electronics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Clou Electronics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Clou may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with China Citic and Shenzhen Clou

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

The idea behind China Citic Bank and Shenzhen Clou Electronics 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 Commodity Directory module to find actively traded commodities issued by global exchanges.