Correlation Between CITIC and Swire Pacific
Can any of the company-specific risk be diversified away by investing in both CITIC and Swire Pacific 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 Swire Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITIC Limited and Swire Pacific Ltd, you can compare the effects of market volatilities on CITIC and Swire Pacific 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 Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC and Swire Pacific.
Diversification Opportunities for CITIC and Swire Pacific
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CITIC and Swire is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Swire Pacific Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific 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 Swire Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Pacific has no effect on the direction of CITIC i.e., CITIC and Swire Pacific go up and down completely randomly.
Pair Corralation between CITIC and Swire Pacific
Assuming the 90 days horizon CITIC is expected to generate 1.92 times less return on investment than Swire Pacific. But when comparing it to its historical volatility, CITIC Limited is 1.39 times less risky than Swire Pacific. It trades about 0.04 of its potential returns per unit of risk. Swire Pacific Ltd is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 493.00 in Swire Pacific Ltd on September 3, 2024 and sell it today you would earn a total of 175.00 from holding Swire Pacific Ltd or generate 35.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 76.78% |
| Values | Daily Returns |
CITIC Limited vs. Swire Pacific Ltd
Performance |
| Timeline |
| CITIC Limited |
| Swire Pacific |
CITIC and Swire Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITIC and Swire Pacific
The main advantage of trading using opposite CITIC and Swire Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC position performs unexpectedly, Swire Pacific 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 Swire Pacific will offset losses from the drop in Swire Pacific's long position.The idea behind CITIC Limited and Swire Pacific Ltd 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.| Swire Pacific vs. CITIC Limited | Swire Pacific vs. Fosun International | Swire Pacific vs. Cibl Inc | Swire Pacific vs. Jardine Matheson Holdings |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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