Correlation Between CITIC RESHLDGS and CITIC Securities

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

By analyzing existing cross correlation between CITIC RESHLDGS HD and CITIC Securities, you can compare the effects of market volatilities on CITIC RESHLDGS and CITIC Securities 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 RESHLDGS with a short position of CITIC Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC RESHLDGS and CITIC Securities.

Diversification Opportunities for CITIC RESHLDGS and CITIC Securities

-0.11

Correlation Coefficient

CITIC RESHLDGS  CITIC Securities

Good diversification

The 3 months correlation between CITIC and CITIC is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CITIC RESHLDGS HD and CITIC Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Securities and CITIC RESHLDGS 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 RESHLDGS HD are associated (or correlated) with CITIC Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Securities has no effect on the direction of CITIC RESHLDGS i.e., CITIC RESHLDGS and CITIC Securities go up and down completely randomly.

Pair Corralation between CITIC RESHLDGS and CITIC Securities

Assuming the 90 days horizon CITIC RESHLDGS HD is expected to generate 2.18 times more return on investment than CITIC Securities. However, CITIC RESHLDGS is 2.18 times more volatile than CITIC Securities. It trades about 0.04 of its potential returns per unit of risk. CITIC Securities is currently generating about 0.01 per unit of risk. If you would invest  3.70  in CITIC RESHLDGS HD on December 20, 2024 and sell it today you would earn a total of  0.10  from holding CITIC RESHLDGS HD or generate 2.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

CITIC RESHLDGS HD  vs.  CITIC Securities

CITIC RESHLDGS HD

Risk-Adjusted Performance

Insignificant

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

CITIC Securities

Risk-Adjusted Performance

Weak

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

Pair Trading with CITIC RESHLDGS and CITIC Securities

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

The idea behind CITIC RESHLDGS HD and CITIC Securities 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.