Correlation Between Citic and Teijin

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

By analyzing existing cross correlation between Citic Ltd ADR and Teijin, you can compare the effects of market volatilities on Citic and Teijin 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 Teijin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic and Teijin.

Diversification Opportunities for Citic and Teijin

0.12

Correlation Coefficient

Citic  Teijin

Average diversification

The 3 months correlation between Citic and Teijin is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citic Ltd ADR and Teijin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teijin 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 Ltd ADR are associated (or correlated) with Teijin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teijin has no effect on the direction of Citic i.e., Citic and Teijin go up and down completely randomly.

Pair Corralation between Citic and Teijin

Assuming the 90 days horizon Citic is expected to generate 1.24 times less return on investment than Teijin. In addition to that, Citic is 2.25 times more volatile than Teijin. It trades about 0.03 of its total potential returns per unit of risk. Teijin is currently generating about 0.1 per unit of volatility. If you would invest  847.00  in Teijin on December 29, 2024 and sell it today you would earn a total of  64.00  from holding Teijin or generate 7.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Citic Ltd ADR  vs.  Teijin

Citic Ltd ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Citic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Teijin

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teijin are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Teijin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citic and Teijin

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

The idea behind Citic Ltd ADR and Teijin 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.