Correlation Between CITIC and Metro Pacific

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

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

Diversification Opportunities for CITIC and Metro Pacific

0.47

Correlation Coefficient

CITIC  Metro Pacific

Very weak diversification

The 3 months correlation between CITIC and Metro is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Metro Pacific Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Pacific Investments 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 Metro Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Pacific Investments has no effect on the direction of CITIC i.e., CITIC and Metro Pacific go up and down completely randomly.

Pair Corralation between CITIC and Metro Pacific

If you would invest  10.00  in Metro Pacific Investments on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Metro Pacific Investments or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

CITIC Limited  vs.  Metro Pacific Investments

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.

Metro Pacific Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CITIC and Metro Pacific

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

The idea behind CITIC Limited and Metro Pacific Investments 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.