Correlation Between CITIC Securities and Cangzhou Mingzhu

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

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

Diversification Opportunities for CITIC Securities and Cangzhou Mingzhu

0.84

Correlation Coefficient

CITIC Securities  Cangzhou Mingzhu

Very poor diversification

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

Pair Corralation between CITIC Securities and Cangzhou Mingzhu

Assuming the 90 days trading horizon CITIC Securities Co is expected to generate 1.2 times more return on investment than Cangzhou Mingzhu. However, CITIC Securities is 1.2 times more volatile than Cangzhou Mingzhu Plastic. It trades about 0.18 of its potential returns per unit of risk. Cangzhou Mingzhu Plastic is currently generating about 0.11 per unit of risk. If you would invest  2,116  in CITIC Securities Co on September 25, 2024 and sell it today you would earn a total of  876.00  from holding CITIC Securities Co or generate 41.4% return on investment over 90 days.

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

CITIC Securities Co  vs.  Cangzhou Mingzhu Plastic

CITIC Securities

Risk-Adjusted Performance

14 of 100

Good

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

Cangzhou Mingzhu Plastic

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with CITIC Securities and Cangzhou Mingzhu

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

The idea behind CITIC Securities Co and Cangzhou Mingzhu Plastic 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.