Correlation Between Metro Pacific and CITIC

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

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

Diversification Opportunities for Metro Pacific and CITIC

0.47

Correlation Coefficient

Metro Pacific  CITIC

Very weak diversification

The 3 months correlation between Metro and CITIC is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Metro Pacific Investments and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited and Metro Pacific 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 Metro Pacific Investments 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 Metro Pacific i.e., Metro Pacific and CITIC go up and down completely randomly.

Pair Corralation between Metro Pacific and CITIC

If you would invest  96.00  in CITIC Limited on September 1, 2024 and sell it today you would earn a total of  14.00  from holding CITIC Limited or generate 14.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.61%
Values	Daily Returns

Metro Pacific Investments  vs.  CITIC Limited

Metro Pacific Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Metro Pacific and CITIC

The main advantage of trading using opposite Metro Pacific and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Pacific 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 Metro Pacific Investments 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.