Correlation Between Zhongtong Guomai and CITIC Metal

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

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

Diversification Opportunities for Zhongtong Guomai and CITIC Metal

0.78

Correlation Coefficient

Zhongtong Guomai  CITIC Metal

Poor diversification

The 3 months correlation between Zhongtong and CITIC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zhongtong Guomai Communication and CITIC Metal Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Metal and Zhongtong Guomai 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 Zhongtong Guomai Communication 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 Zhongtong Guomai i.e., Zhongtong Guomai and CITIC Metal go up and down completely randomly.

Pair Corralation between Zhongtong Guomai and CITIC Metal

Assuming the 90 days trading horizon Zhongtong Guomai Communication is expected to generate 1.86 times more return on investment than CITIC Metal. However, Zhongtong Guomai is 1.86 times more volatile than CITIC Metal Co. It trades about 0.19 of its potential returns per unit of risk. CITIC Metal Co is currently generating about 0.13 per unit of risk. If you would invest  731.00  in Zhongtong Guomai Communication on September 4, 2024 and sell it today you would earn a total of  374.00  from holding Zhongtong Guomai Communication or generate 51.16% return on investment over 90 days.

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

Zhongtong Guomai Communication  vs.  CITIC Metal Co

Zhongtong Guomai Com

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongtong Guomai Communication are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongtong Guomai 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 Zhongtong Guomai and CITIC Metal

The main advantage of trading using opposite Zhongtong Guomai and CITIC Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zhongtong Guomai 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 Zhongtong Guomai Communication 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.