Correlation Between Alaska Power and Citic

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

By analyzing existing cross correlation between Alaska Power Telephone and Citic Ltd ADR, you can compare the effects of market volatilities on Alaska Power 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 Alaska Power with a short position of Citic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Power and Citic.

Diversification Opportunities for Alaska Power and Citic

0.39

Correlation Coefficient

Alaska Power  Citic

Weak diversification

The 3 months correlation between Alaska and Citic is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Power Telephone and Citic Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Ltd ADR and Alaska Power 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 Alaska Power Telephone 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 ADR has no effect on the direction of Alaska Power i.e., Alaska Power and Citic go up and down completely randomly.

Pair Corralation between Alaska Power and Citic

Given the investment horizon of 90 days Alaska Power is expected to generate 1.74 times less return on investment than Citic. But when comparing it to its historical volatility, Alaska Power Telephone is 2.98 times less risky than Citic. It trades about 0.06 of its potential returns per unit of risk. Citic Ltd ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Citic Ltd ADR on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Citic Ltd ADR or generate 3.74% return on investment over 90 days.

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

Alaska Power Telephone  vs.  Citic Ltd ADR

Alaska Power Telephone

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alaska Power Telephone are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Alaska Power is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Citic Ltd ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Citic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alaska Power and Citic

The main advantage of trading using opposite Alaska Power and Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Power 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 Alaska Power Telephone and Citic Ltd ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.