Correlation Between China Citic and Yantai North

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

Diversification Opportunities for China Citic and Yantai North

0.1

Correlation Coefficient

China Citic  Yantai North

Average diversification

The 3 months correlation between China and Yantai is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Yantai North Andre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yantai North Andre 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 Yantai North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yantai North Andre has no effect on the direction of China Citic i.e., China Citic and Yantai North go up and down completely randomly.

Pair Corralation between China Citic and Yantai North

Assuming the 90 days trading horizon China Citic Bank is expected to under-perform the Yantai North. But the stock apears to be less risky and, when comparing its historical volatility, China Citic Bank is 1.78 times less risky than Yantai North. The stock trades about -0.02 of its potential returns per unit of risk. The Yantai North Andre is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,151  in Yantai North Andre on December 3, 2024 and sell it today you would earn a total of  88.00  from holding Yantai North Andre or generate 2.79% 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.  Yantai North Andre

China Citic Bank

Risk-Adjusted Performance

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.

Yantai North Andre

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yantai North Andre are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Yantai North is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Citic and Yantai North

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

The idea behind China Citic Bank and Yantai North Andre 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.