Correlation Between China Citic and SAIC

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

Diversification Opportunities for China Citic and SAIC

0.49

Correlation Coefficient

China Citic  SAIC

Very weak diversification

The 3 months correlation between China and SAIC is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and SAIC Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAIC Motor 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 SAIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAIC Motor Corp has no effect on the direction of China Citic i.e., China Citic and SAIC go up and down completely randomly.

Pair Corralation between China Citic and SAIC

Assuming the 90 days trading horizon China Citic is expected to generate 1.02 times less return on investment than SAIC. In addition to that, China Citic is 1.04 times more volatile than SAIC Motor Corp. It trades about 0.05 of its total potential returns per unit of risk. SAIC Motor Corp is currently generating about 0.05 per unit of volatility. If you would invest  1,405  in SAIC Motor Corp on October 3, 2024 and sell it today you would earn a total of  671.00  from holding SAIC Motor Corp or generate 47.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

China Citic Bank  vs.  SAIC Motor Corp

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.

SAIC Motor Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAIC Motor Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SAIC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Citic and SAIC

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

The idea behind China Citic Bank and SAIC Motor 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.