Correlation Between CITIC and Arca Continental

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

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

Diversification Opportunities for CITIC and Arca Continental

0.07

Correlation Coefficient

CITIC  Arca Continental

Significant diversification

The 3 months correlation between CITIC and Arca is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of CITIC i.e., CITIC and Arca Continental go up and down completely randomly.

Pair Corralation between CITIC and Arca Continental

Assuming the 90 days horizon CITIC Limited is expected to under-perform the Arca Continental. But the pink sheet apears to be less risky and, when comparing its historical volatility, CITIC Limited is 1.85 times less risky than Arca Continental. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Arca Continental SAB is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  843.00  in Arca Continental SAB on December 4, 2024 and sell it today you would earn a total of  177.00  from holding Arca Continental SAB or generate 21.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.88%
Values	Daily Returns

CITIC Limited  vs.  Arca Continental SAB

CITIC Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Arca Continental SAB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arca Continental SAB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Arca Continental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC and Arca Continental

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

The idea behind CITIC Limited and Arca Continental SAB 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.