Correlation Between ITOCHU and CITIC

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

By analyzing existing cross correlation between ITOCHU and CITIC LTD ADR5, you can compare the effects of market volatilities on ITOCHU 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 ITOCHU with a short position of CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and CITIC.

Diversification Opportunities for ITOCHU and CITIC

-0.1

Correlation Coefficient

ITOCHU  CITIC

Good diversification

The 3 months correlation between ITOCHU and CITIC is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and CITIC LTD ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC LTD ADR5 and ITOCHU 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 ITOCHU 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 LTD ADR5 has no effect on the direction of ITOCHU i.e., ITOCHU and CITIC go up and down completely randomly.

Pair Corralation between ITOCHU and CITIC

Assuming the 90 days horizon ITOCHU is expected to under-perform the CITIC. In addition to that, ITOCHU is 1.03 times more volatile than CITIC LTD ADR5. It trades about -0.01 of its total potential returns per unit of risk. CITIC LTD ADR5 is currently generating about 0.04 per unit of volatility. If you would invest  515.00  in CITIC LTD ADR5 on September 23, 2024 and sell it today you would earn a total of  5.00  from holding CITIC LTD ADR5 or generate 0.97% return on investment over 90 days.

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

ITOCHU  vs.  CITIC LTD ADR5

ITOCHU

Risk-Adjusted Performance

0 of 100

Very Weak

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

CITIC LTD ADR5

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC LTD ADR5 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, CITIC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITOCHU and CITIC

The main advantage of trading using opposite ITOCHU and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU 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 ITOCHU and CITIC LTD ADR5 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.