Correlation Between CITIC and NAGOYA RAILROAD

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

By analyzing existing cross correlation between CITIC LTD ADR5 and NAGOYA RAILROAD, you can compare the effects of market volatilities on CITIC and NAGOYA RAILROAD 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 NAGOYA RAILROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC and NAGOYA RAILROAD.

Diversification Opportunities for CITIC and NAGOYA RAILROAD

-0.26

Correlation Coefficient

CITIC  NAGOYA RAILROAD

Very good diversification

The 3 months correlation between CITIC and NAGOYA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding CITIC LTD ADR5 and NAGOYA RAILROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAGOYA RAILROAD 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 LTD ADR5 are associated (or correlated) with NAGOYA RAILROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAGOYA RAILROAD has no effect on the direction of CITIC i.e., CITIC and NAGOYA RAILROAD go up and down completely randomly.

Pair Corralation between CITIC and NAGOYA RAILROAD

Assuming the 90 days trading horizon CITIC is expected to generate 511.0 times less return on investment than NAGOYA RAILROAD. But when comparing it to its historical volatility, CITIC LTD ADR5 is 1.14 times less risky than NAGOYA RAILROAD. It trades about 0.0 of its potential returns per unit of risk. NAGOYA RAILROAD is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,020  in NAGOYA RAILROAD on October 9, 2024 and sell it today you would earn a total of  50.00  from holding NAGOYA RAILROAD or generate 4.9% return on investment over 90 days.

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

CITIC LTD ADR5  vs.  NAGOYA RAILROAD

CITIC LTD ADR5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC LTD ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CITIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NAGOYA RAILROAD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NAGOYA RAILROAD may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CITIC and NAGOYA RAILROAD

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

The idea behind CITIC LTD ADR5 and NAGOYA RAILROAD 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..