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

0.07

Correlation Coefficient

ITOCHU  CITIC

Significant diversification

The 3 months correlation between ITOCHU and CITIC is 0.07. 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 20.66 times less return on investment than CITIC. But when comparing it to its historical volatility, ITOCHU is 1.04 times less risky than CITIC. It trades about 0.01 of its potential returns per unit of risk. CITIC Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  97.00  in CITIC Limited on April 20, 2025 and sell it today you would earn a total of  21.00  from holding CITIC Limited or generate 21.65% return on investment over 90 days.

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

ITOCHU  vs.  CITIC Limited

ITOCHU

Risk-Adjusted Performance

Very Weak

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

CITIC Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Limited are ranked lower than 16 (%) 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.

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.

The idea behind ITOCHU and CITIC Limited 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.