Correlation Between CITIC and Arca Continental
Can any of the company-specific risk be diversified away by investing in both CITIC and Arca Continental 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 Arca Continental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITIC Limited and Arca Continental SAB, you can compare the effects of market volatilities on CITIC and Arca Continental 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 Arca Continental. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC and Arca Continental.
Diversification Opportunities for CITIC and Arca Continental
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CITIC and Arca is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Arca Continental SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arca Continental SAB 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 Arca Continental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arca Continental SAB has no effect on the direction of CITIC i.e., CITIC and Arca Continental go up and down completely randomly.
Pair Corralation between CITIC and Arca Continental
Assuming the 90 days horizon CITIC Limited is expected to generate 1.61 times more return on investment than Arca Continental. However, CITIC is 1.61 times more volatile than Arca Continental SAB. It trades about 0.06 of its potential returns per unit of risk. Arca Continental SAB is currently generating about 0.05 per unit of risk. If you would invest 93.00 in CITIC Limited on December 4, 2024 and sell it today you would earn a total of 8.00 from holding CITIC Limited or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 40.16% |
| Values | Daily Returns |
CITIC Limited vs. Arca Continental SAB
Performance |
| Timeline |
| CITIC Limited |
| Arca Continental SAB |
CITIC and Arca Continental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITIC and Arca Continental
The main advantage of trading using opposite CITIC and Arca Continental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC position performs unexpectedly, Arca Continental 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 Arca Continental will offset losses from the drop in Arca Continental's long position.The idea behind CITIC Limited and Arca Continental SAB 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.| Arca Continental vs. The Coca Cola | Arca Continental vs. Monster Beverage Corp | Arca Continental vs. Celsius Holdings | Arca Continental vs. Coca Cola Consolidated |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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