Correlation Between CITIC and CITIC Securities

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

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

Diversification Opportunities for CITIC and CITIC Securities

0.52

Correlation Coefficient

CITIC  CITIC Securities

Very weak diversification

The 3 months correlation between CITIC and CITIC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and CITIC Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Securities and 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 CITIC Limited are associated (or correlated) with CITIC Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Securities has no effect on the direction of CITIC i.e., CITIC and CITIC Securities go up and down completely randomly.

Pair Corralation between CITIC and CITIC Securities

Assuming the 90 days horizon CITIC Limited is expected to generate 0.71 times more return on investment than CITIC Securities. However, CITIC Limited is 1.4 times less risky than CITIC Securities. It trades about 0.06 of its potential returns per unit of risk. CITIC Securities is currently generating about 0.01 per unit of risk. If you would invest  106.00  in CITIC Limited on December 20, 2024 and sell it today you would earn a total of  7.00  from holding CITIC Limited or generate 6.6% return on investment over 90 days.

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

CITIC Limited  vs.  CITIC Securities

CITIC Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITIC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with CITIC and CITIC Securities

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

The idea behind CITIC Limited and CITIC Securities 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.