Correlation Between China Citic and Beijing Ultrapower

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

Diversification Opportunities for China Citic and Beijing Ultrapower

0.69

Correlation Coefficient

China Citic  Beijing Ultrapower

Poor diversification

The 3 months correlation between China and Beijing is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Beijing Ultrapower Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Ultrapower 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 Beijing Ultrapower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Ultrapower has no effect on the direction of China Citic i.e., China Citic and Beijing Ultrapower go up and down completely randomly.

Pair Corralation between China Citic and Beijing Ultrapower

Assuming the 90 days trading horizon China Citic Bank is expected to generate 0.52 times more return on investment than Beijing Ultrapower. However, China Citic Bank is 1.91 times less risky than Beijing Ultrapower. It trades about 0.04 of its potential returns per unit of risk. Beijing Ultrapower Software is currently generating about -0.03 per unit of risk. If you would invest  674.00  in China Citic Bank on September 19, 2024 and sell it today you would earn a total of  7.00  from holding China Citic Bank or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

China Citic Bank  vs.  Beijing Ultrapower Software

China Citic Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Citic Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Citic sustained solid returns over the last few months and may actually be approaching a breakup point.

Beijing Ultrapower

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Ultrapower Software are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Ultrapower sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Citic and Beijing Ultrapower

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

The idea behind China Citic Bank and Beijing Ultrapower Software 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 CEOs Directory module to screen CEOs from public companies around the world.