Correlation Between Tongling Nonferrous and CITIC Metal

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

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

Diversification Opportunities for Tongling Nonferrous and CITIC Metal

0.84

Correlation Coefficient

Tongling Nonferrous  CITIC Metal

Very poor diversification

The 3 months correlation between Tongling and CITIC is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Tongling Nonferrous Metals and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Tongling Nonferrous 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 Tongling Nonferrous Metals are associated (or correlated) with CITIC Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Metal has no effect on the direction of Tongling Nonferrous i.e., Tongling Nonferrous and CITIC Metal go up and down completely randomly.

Pair Corralation between Tongling Nonferrous and CITIC Metal

Assuming the 90 days trading horizon Tongling Nonferrous Metals is expected to generate 1.19 times more return on investment than CITIC Metal. However, Tongling Nonferrous is 1.19 times more volatile than CITIC Metal Co. It trades about 0.11 of its potential returns per unit of risk. CITIC Metal Co is currently generating about 0.11 per unit of risk. If you would invest  295.00  in Tongling Nonferrous Metals on September 16, 2024 and sell it today you would earn a total of  50.00  from holding Tongling Nonferrous Metals or generate 16.95% return on investment over 90 days.

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

Tongling Nonferrous Metals  vs.  CITIC Metal Co

Tongling Nonferrous

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tongling Nonferrous Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tongling Nonferrous sustained solid returns over the last few months and may actually be approaching a breakup point.

CITIC Metal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Metal Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tongling Nonferrous and CITIC Metal

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

The idea behind Tongling Nonferrous Metals and CITIC Metal Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.