Correlation Between China Citic and Shenzhen MTC

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

Diversification Opportunities for China Citic and Shenzhen MTC

0.17

Correlation Coefficient

China Citic  Shenzhen MTC

Average diversification

The 3 months correlation between China and Shenzhen is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Shenzhen MTC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen MTC 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 MTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen MTC has no effect on the direction of China Citic i.e., China Citic and Shenzhen MTC go up and down completely randomly.

Pair Corralation between China Citic and Shenzhen MTC

Assuming the 90 days trading horizon China Citic Bank is expected to generate 0.66 times more return on investment than Shenzhen MTC. However, China Citic Bank is 1.51 times less risky than Shenzhen MTC. It trades about 0.02 of its potential returns per unit of risk. Shenzhen MTC Co is currently generating about -0.12 per unit of risk. If you would invest  706.00  in China Citic Bank on December 30, 2024 and sell it today you would earn a total of  5.00  from holding China Citic Bank or generate 0.71% return on investment over 90 days.

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

China Citic Bank  vs.  Shenzhen MTC Co

China Citic Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Citic Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 MTC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen MTC Co 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 China Citic and Shenzhen MTC

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

The idea behind China Citic Bank and Shenzhen MTC 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.