Correlation Between CITIC and CITIC

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

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

Diversification Opportunities for CITIC and CITIC

0.86

Correlation Coefficient

CITIC  CITIC

Very poor diversification

The 3 months correlation between CITIC and CITIC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CITIC and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited 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 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 Limited has no effect on the direction of CITIC i.e., CITIC and CITIC go up and down completely randomly.

Pair Corralation between CITIC and CITIC

Assuming the 90 days trading horizon CITIC is expected to under-perform the CITIC. But the stock apears to be less risky and, when comparing its historical volatility, CITIC is 1.16 times less risky than CITIC. The stock trades about -0.16 of its potential returns per unit of risk. The CITIC Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  106.00  in CITIC Limited on October 8, 2024 and sell it today you would lose (1.00) from holding CITIC Limited or give up 0.94% of portfolio value over 90 days.

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

CITIC  vs.  CITIC Limited

CITIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CITIC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CITIC Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CITIC and CITIC

The main advantage of trading using opposite CITIC and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC 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 CITIC and CITIC Limited 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.