Correlation Between Rocket Internet and CITIC

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

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

Diversification Opportunities for Rocket Internet and CITIC

-0.1

Correlation Coefficient

Rocket Internet  CITIC

Good diversification

The 3 months correlation between Rocket and CITIC is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE 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 Rocket Internet 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 Rocket Internet SE 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 Rocket Internet i.e., Rocket Internet and CITIC go up and down completely randomly.

Pair Corralation between Rocket Internet and CITIC

Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the CITIC. But the stock apears to be less risky and, when comparing its historical volatility, Rocket Internet SE is 1.23 times less risky than CITIC. The stock trades about -0.03 of its potential returns per unit of risk. The CITIC LTD ADR5 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  424.00  in CITIC LTD ADR5 on October 11, 2024 and sell it today you would earn a total of  81.00  from holding CITIC LTD ADR5 or generate 19.1% return on investment over 90 days.

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

Rocket Internet SE  vs.  CITIC LTD ADR5

Rocket Internet SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CITIC LTD ADR5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC LTD ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CITIC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rocket Internet and CITIC

The main advantage of trading using opposite Rocket Internet and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocket Internet 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 Rocket Internet SE 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.