Correlation Between Zhejiang JIULI and CITIC Metal

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

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

Diversification Opportunities for Zhejiang JIULI and CITIC Metal

0.81

Correlation Coefficient

Zhejiang JIULI  CITIC Metal

Very poor diversification

The 3 months correlation between Zhejiang and CITIC is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Zhejiang JIULI Hi tech and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Zhejiang JIULI 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 Zhejiang JIULI Hi tech 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 Zhejiang JIULI i.e., Zhejiang JIULI and CITIC Metal go up and down completely randomly.

Pair Corralation between Zhejiang JIULI and CITIC Metal

Assuming the 90 days trading horizon Zhejiang JIULI Hi tech is expected to generate 1.55 times more return on investment than CITIC Metal. However, Zhejiang JIULI is 1.55 times more volatile than CITIC Metal Co. It trades about 0.23 of its potential returns per unit of risk. CITIC Metal Co is currently generating about -0.25 per unit of risk. If you would invest  2,253  in Zhejiang JIULI Hi tech on September 12, 2024 and sell it today you would earn a total of  217.00  from holding Zhejiang JIULI Hi tech or generate 9.63% return on investment over 90 days.

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

Zhejiang JIULI Hi tech  vs.  CITIC Metal Co

Zhejiang JIULI Hi

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang JIULI Hi tech are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang JIULI sustained solid returns over the last few months and may actually be approaching a breakup point.

CITIC Metal

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Metal Co are ranked lower than 10 (%) 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 Zhejiang JIULI and CITIC Metal

The main advantage of trading using opposite Zhejiang JIULI and CITIC Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhejiang JIULI 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 Zhejiang JIULI Hi tech 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.