Correlation Between CITIC and Jardine Matheson

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

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

Diversification Opportunities for CITIC and Jardine Matheson

0.76

Correlation Coefficient

CITIC  Jardine Matheson

Poor diversification

The 3 months correlation between CITIC and Jardine is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Jardine Matheson Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Matheson Holdings 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 Jardine Matheson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Matheson Holdings has no effect on the direction of CITIC i.e., CITIC and Jardine Matheson go up and down completely randomly.

Pair Corralation between CITIC and Jardine Matheson

Assuming the 90 days horizon CITIC Limited is expected to generate 2.45 times more return on investment than Jardine Matheson. However, CITIC is 2.45 times more volatile than Jardine Matheson Holdings. It trades about 0.12 of its potential returns per unit of risk. Jardine Matheson Holdings is currently generating about 0.06 per unit of risk. If you would invest  111.00  in CITIC Limited on December 29, 2024 and sell it today you would earn a total of  27.00  from holding CITIC Limited or generate 24.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

CITIC Limited  vs.  Jardine Matheson Holdings

CITIC Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 9 (%) 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.

Jardine Matheson Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jardine Matheson Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Jardine Matheson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CITIC and Jardine Matheson

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

The idea behind CITIC Limited and Jardine Matheson Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.