Correlation Between Fosun International and CITIC

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

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

Diversification Opportunities for Fosun International and CITIC

0.43

Correlation Coefficient

Fosun International  CITIC

Very weak diversification

The 3 months correlation between Fosun and CITIC is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fosun International and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited and Fosun International 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 Fosun International are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of Fosun International i.e., Fosun International and CITIC go up and down completely randomly.

Pair Corralation between Fosun International and CITIC

Assuming the 90 days horizon Fosun International is expected to generate 1.23 times more return on investment than CITIC. However, Fosun International is 1.23 times more volatile than CITIC Limited. It trades about -0.18 of its potential returns per unit of risk. CITIC Limited is currently generating about -0.22 per unit of risk. If you would invest  59.00  in Fosun International on September 1, 2024 and sell it today you would lose (5.00) from holding Fosun International or give up 8.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Fosun International  vs.  CITIC Limited

Fosun International

Risk-Adjusted Performance

3 of 100

Insignificant

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

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.

Pair Trading with Fosun International and CITIC

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

The idea behind Fosun International and CITIC Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.