Correlation Between CITIC and Marubeni

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

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

Diversification Opportunities for CITIC and Marubeni

0.19

Correlation Coefficient

CITIC  Marubeni

Average diversification

The 3 months correlation between CITIC and Marubeni is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Marubeni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marubeni and 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 CITIC Limited are associated (or correlated) with Marubeni. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marubeni has no effect on the direction of CITIC i.e., CITIC and Marubeni go up and down completely randomly.

Pair Corralation between CITIC and Marubeni

Assuming the 90 days horizon CITIC Limited is expected to generate 1.73 times more return on investment than Marubeni. However, CITIC is 1.73 times more volatile than Marubeni. It trades about 0.11 of its potential returns per unit of risk. Marubeni is currently generating about -0.04 per unit of risk. 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

CITIC Limited  vs.  Marubeni

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.

Marubeni

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CITIC and Marubeni

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

The idea behind CITIC Limited and Marubeni 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.