Correlation Between DAIDO METAL and CITIC

Can any of the company-specific risk be diversified away by investing in both DAIDO METAL and CITIC 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 DAIDO METAL and CITIC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DAIDO METAL TD and CITIC LTD ADR5, you can compare the effects of market volatilities on DAIDO METAL and CITIC 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 DAIDO METAL with a short position of CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIDO METAL and CITIC.

Diversification Opportunities for DAIDO METAL and CITIC

0.65

Correlation Coefficient

DAIDO METAL  CITIC

Poor diversification

The 3 months correlation between DAIDO and CITIC is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding DAIDO METAL TD and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 and DAIDO METAL 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 DAIDO METAL TD are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC LTD ADR5 has no effect on the direction of DAIDO METAL i.e., DAIDO METAL and CITIC go up and down completely randomly.

Pair Corralation between DAIDO METAL and CITIC

Assuming the 90 days horizon DAIDO METAL is expected to generate 1.04 times less return on investment than CITIC. But when comparing it to its historical volatility, DAIDO METAL TD is 1.05 times less risky than CITIC. It trades about 0.12 of its potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  520.00  in CITIC LTD ADR5 on December 20, 2024 and sell it today you would earn a total of  55.00  from holding CITIC LTD ADR5 or generate 10.58% return on investment over 90 days.

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

DAIDO METAL TD  vs.  CITIC LTD ADR5

DAIDO METAL TD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DAIDO METAL TD are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DAIDO METAL may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CITIC LTD ADR5

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, CITIC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DAIDO METAL and CITIC

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

The idea behind DAIDO METAL TD and CITIC LTD ADR5 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.