Correlation Between CITIC Metal and Fibocom Wireless

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

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

Diversification Opportunities for CITIC Metal and Fibocom Wireless

0.43

Correlation Coefficient

CITIC Metal  Fibocom Wireless

Very weak diversification

The 3 months correlation between CITIC and Fibocom is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Fibocom Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibocom Wireless and CITIC Metal 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 Metal Co are associated (or correlated) with Fibocom Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibocom Wireless has no effect on the direction of CITIC Metal i.e., CITIC Metal and Fibocom Wireless go up and down completely randomly.

Pair Corralation between CITIC Metal and Fibocom Wireless

Assuming the 90 days trading horizon CITIC Metal is expected to generate 3.73 times less return on investment than Fibocom Wireless. But when comparing it to its historical volatility, CITIC Metal Co is 2.53 times less risky than Fibocom Wireless. It trades about 0.05 of its potential returns per unit of risk. Fibocom Wireless is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,646  in Fibocom Wireless on September 30, 2024 and sell it today you would earn a total of  517.00  from holding Fibocom Wireless or generate 31.41% return on investment over 90 days.

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

CITIC Metal Co  vs.  Fibocom Wireless

CITIC Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Metal Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fibocom Wireless

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fibocom Wireless are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibocom Wireless sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Metal and Fibocom Wireless

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

The idea behind CITIC Metal Co and Fibocom Wireless 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.