Correlation Between MT Bank and China Citic

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

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

Diversification Opportunities for MT Bank and China Citic

-0.7

Correlation Coefficient

MT Bank  China Citic

Excellent diversification

The 3 months correlation between MTB and China is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and China Citic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Citic Bank and MT Bank 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 MT Bank are associated (or correlated) with China Citic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Citic Bank has no effect on the direction of MT Bank i.e., MT Bank and China Citic go up and down completely randomly.

Pair Corralation between MT Bank and China Citic

Considering the 90-day investment horizon MT Bank is expected to under-perform the China Citic. But the stock apears to be less risky and, when comparing its historical volatility, MT Bank is 2.39 times less risky than China Citic. The stock trades about -0.03 of its potential returns per unit of risk. The China Citic Bank is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,223  in China Citic Bank on December 27, 2024 and sell it today you would earn a total of  209.00  from holding China Citic Bank or generate 17.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

MT Bank  vs.  China Citic Bank

MT Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days MT Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Citic Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Citic Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking indicators, China Citic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MT Bank and China Citic

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

The idea behind MT Bank and China Citic Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.