Correlation Between CITIC and SUMITOMO P

Can any of the company-specific risk be diversified away by investing in both CITIC and SUMITOMO P 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 SUMITOMO P 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 SUMITOMO P SP, you can compare the effects of market volatilities on CITIC and SUMITOMO P 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 SUMITOMO P. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC and SUMITOMO P.

Diversification Opportunities for CITIC and SUMITOMO P

0.15

Correlation Coefficient

CITIC  SUMITOMO P

Average diversification

The 3 months correlation between CITIC and SUMITOMO is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CITIC LTD ADR5 and SUMITOMO P SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUMITOMO P SP 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 SUMITOMO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUMITOMO P SP has no effect on the direction of CITIC i.e., CITIC and SUMITOMO P go up and down completely randomly.

Pair Corralation between CITIC and SUMITOMO P

Assuming the 90 days trading horizon CITIC LTD ADR5 is expected to under-perform the SUMITOMO P. In addition to that, CITIC is 1.1 times more volatile than SUMITOMO P SP. It trades about -0.22 of its total potential returns per unit of risk. SUMITOMO P SP is currently generating about -0.18 per unit of volatility. If you would invest  2,060  in SUMITOMO P SP on October 25, 2024 and sell it today you would lose (90.00) from holding SUMITOMO P SP or give up 4.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

CITIC LTD ADR5  vs.  SUMITOMO P SP

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.

SUMITOMO P SP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SUMITOMO P SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SUMITOMO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CITIC and SUMITOMO P

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

The idea behind CITIC LTD ADR5 and SUMITOMO P SP 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.