Correlation Between CK HUTCHISON and CITIC

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

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

Diversification Opportunities for CK HUTCHISON and CITIC

0.09

Correlation Coefficient

CK HUTCHISON  CITIC

Significant diversification

The 3 months correlation between 2CKA and CITIC is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CK HUTCHISON HLDGS and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited and CK HUTCHISON 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 CK HUTCHISON HLDGS 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 CK HUTCHISON i.e., CK HUTCHISON and CITIC go up and down completely randomly.

Pair Corralation between CK HUTCHISON and CITIC

Assuming the 90 days trading horizon CK HUTCHISON is expected to generate 29.14 times less return on investment than CITIC. But when comparing it to its historical volatility, CK HUTCHISON HLDGS is 1.62 times less risky than CITIC. It trades about 0.01 of its potential returns per unit of risk. CITIC Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  87.00  in CITIC Limited on September 23, 2024 and sell it today you would earn a total of  19.00  from holding CITIC Limited or generate 21.84% return on investment over 90 days.

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

CK HUTCHISON HLDGS  vs.  CITIC Limited

CK HUTCHISON HLDGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CK HUTCHISON HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, CK HUTCHISON is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CITIC Limited

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with CK HUTCHISON and CITIC

The main advantage of trading using opposite CK HUTCHISON and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CK HUTCHISON 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 CK HUTCHISON HLDGS 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.