Correlation Between CITIC and Fosun International

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

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

Diversification Opportunities for CITIC and Fosun International

0.43

Correlation Coefficient

CITIC  Fosun International

Very weak diversification

The 3 months correlation between CITIC and Fosun is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Fosun International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fosun International 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 Fosun International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fosun International has no effect on the direction of CITIC i.e., CITIC and Fosun International go up and down completely randomly.

Pair Corralation between CITIC and Fosun International

Assuming the 90 days horizon CITIC is expected to generate 1.46 times less return on investment than Fosun International. But when comparing it to its historical volatility, CITIC Limited is 3.13 times less risky than Fosun International. It trades about 0.09 of its potential returns per unit of risk. Fosun International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  51.00  in Fosun International on September 1, 2024 and sell it today you would earn a total of  3.00  from holding Fosun International or generate 5.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

CITIC Limited  vs.  Fosun International

CITIC Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Fosun International

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fosun International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Fosun International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC and Fosun International

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

The idea behind CITIC Limited and Fosun International 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.