Correlation Between CITIC Securities and CITIC RESHLDGS

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

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

Diversification Opportunities for CITIC Securities and CITIC RESHLDGS

-0.11

Correlation Coefficient

CITIC Securities  CITIC RESHLDGS

Good diversification

The 3 months correlation between CITIC and CITIC is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Securities and CITIC RESHLDGS HD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC RESHLDGS HD and CITIC Securities 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 CITIC Securities are associated (or correlated) with CITIC RESHLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC RESHLDGS HD has no effect on the direction of CITIC Securities i.e., CITIC Securities and CITIC RESHLDGS go up and down completely randomly.

Pair Corralation between CITIC Securities and CITIC RESHLDGS

Assuming the 90 days horizon CITIC Securities is expected to generate 7.35 times less return on investment than CITIC RESHLDGS. But when comparing it to its historical volatility, CITIC Securities is 2.18 times less risky than CITIC RESHLDGS. It trades about 0.01 of its potential returns per unit of risk. CITIC RESHLDGS HD is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3.70  in CITIC RESHLDGS HD on December 20, 2024 and sell it today you would earn a total of  0.10  from holding CITIC RESHLDGS HD or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

CITIC Securities  vs.  CITIC RESHLDGS HD

CITIC Securities

Risk-Adjusted Performance

Weak

Over the last 90 days CITIC Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CITIC Securities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

CITIC RESHLDGS HD

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC RESHLDGS HD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITIC RESHLDGS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Securities and CITIC RESHLDGS

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

The idea behind CITIC Securities and CITIC RESHLDGS HD 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.