Correlation Between CITIC and Molson Coors

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

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

Diversification Opportunities for CITIC and Molson Coors

0.39

Correlation Coefficient

CITIC  Molson Coors

Weak diversification

The 3 months correlation between CITIC and Molson is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Molson Coors Brewing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Brewing 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Brewing has no effect on the direction of CITIC i.e., CITIC and Molson Coors go up and down completely randomly.

Pair Corralation between CITIC and Molson Coors

Assuming the 90 days horizon CITIC Limited is expected to generate 1.75 times more return on investment than Molson Coors. However, CITIC is 1.75 times more volatile than Molson Coors Brewing. It trades about 0.08 of its potential returns per unit of risk. Molson Coors Brewing is currently generating about 0.1 per unit of risk. If you would invest  88.00  in CITIC Limited on September 1, 2024 and sell it today you would earn a total of  22.00  from holding CITIC Limited or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

CITIC Limited  vs.  Molson Coors Brewing

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.

Molson Coors Brewing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CITIC and Molson Coors

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

The idea behind CITIC Limited and Molson Coors Brewing 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.