Correlation Between China Citic and China CYTS

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

By analyzing existing cross correlation between China Citic Bank and China CYTS Tours, you can compare the effects of market volatilities on China Citic and China CYTS 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 China Citic with a short position of China CYTS. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Citic and China CYTS.

Diversification Opportunities for China Citic and China CYTS

0.71

Correlation Coefficient

China Citic  China CYTS

Poor diversification

The 3 months correlation between China and China is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and China CYTS Tours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China CYTS Tours and China Citic 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 China Citic Bank are associated (or correlated) with China CYTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China CYTS Tours has no effect on the direction of China Citic i.e., China Citic and China CYTS go up and down completely randomly.

Pair Corralation between China Citic and China CYTS

Assuming the 90 days trading horizon China Citic is expected to generate 1.93 times less return on investment than China CYTS. But when comparing it to its historical volatility, China Citic Bank is 1.07 times less risky than China CYTS. It trades about 0.05 of its potential returns per unit of risk. China CYTS Tours is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,027  in China CYTS Tours on September 28, 2024 and sell it today you would earn a total of  28.00  from holding China CYTS Tours or generate 2.73% return on investment over 90 days.

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

China Citic Bank  vs.  China CYTS Tours

China Citic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Citic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Citic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China CYTS Tours

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China CYTS Tours has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China CYTS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Citic and China CYTS

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

The idea behind China Citic Bank and China CYTS Tours 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.