Correlation Between Marubeni Corp and Citic

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

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

Diversification Opportunities for Marubeni Corp and Citic

0.72

Correlation Coefficient

Marubeni Corp  Citic

Poor diversification

The 3 months correlation between Marubeni and Citic is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Marubeni Corp ADR and Citic Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Ltd ADR and Marubeni Corp 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 Marubeni Corp ADR 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 ADR has no effect on the direction of Marubeni Corp i.e., Marubeni Corp and Citic go up and down completely randomly.

Pair Corralation between Marubeni Corp and Citic

Assuming the 90 days horizon Marubeni Corp ADR is expected to generate 0.66 times more return on investment than Citic. However, Marubeni Corp ADR is 1.52 times less risky than Citic. It trades about 0.08 of its potential returns per unit of risk. Citic Ltd ADR is currently generating about 0.03 per unit of risk. If you would invest  15,059  in Marubeni Corp ADR on December 29, 2024 and sell it today you would earn a total of  1,466  from holding Marubeni Corp ADR or generate 9.74% return on investment over 90 days.

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

Marubeni Corp ADR  vs.  Citic Ltd ADR

Marubeni Corp ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marubeni Corp ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Marubeni Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Marubeni Corp and Citic

The main advantage of trading using opposite Marubeni Corp and Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marubeni Corp 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 Marubeni Corp ADR and Citic Ltd ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.