Correlation Between ITOCHU and CITIC
Can any of the company-specific risk be diversified away by investing in both ITOCHU and CITIC 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 ITOCHU and CITIC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITOCHU and CITIC Limited, you can compare the effects of market volatilities on ITOCHU and CITIC 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 ITOCHU with a short position of CITIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITOCHU and CITIC.
Diversification Opportunities for ITOCHU and CITIC
Good diversification
The 3 months correlation between ITOCHU and CITIC is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding ITOCHU and CITIC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Limited and ITOCHU 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 ITOCHU are associated (or correlated) with CITIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Limited has no effect on the direction of ITOCHU i.e., ITOCHU and CITIC go up and down completely randomly.
Pair Corralation between ITOCHU and CITIC
Assuming the 90 days horizon ITOCHU is expected to generate 6.48 times less return on investment than CITIC. But when comparing it to its historical volatility, ITOCHU is 3.47 times less risky than CITIC. It trades about 0.06 of its potential returns per unit of risk. CITIC Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 14.00 in CITIC Limited on September 19, 2024 and sell it today you would earn a total of 91.00 from holding CITIC Limited or generate 650.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITOCHU vs. CITIC Limited
Performance |
| Timeline |
| ITOCHU |
| CITIC Limited |
ITOCHU and CITIC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITOCHU and CITIC
The main advantage of trading using opposite ITOCHU and CITIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITOCHU position performs unexpectedly, CITIC 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 will offset losses from the drop in CITIC's long position.| ITOCHU vs. Marubeni | ITOCHU vs. Sumitomo | ITOCHU vs. Superior Plus Corp | ITOCHU vs. SIVERS SEMICONDUCTORS AB |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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