Correlation Between Beijing Yanjing and Citic Guoan

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

By analyzing existing cross correlation between Beijing Yanjing Brewery and Citic Guoan Wine, you can compare the effects of market volatilities on Beijing Yanjing and Citic Guoan 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 Beijing Yanjing with a short position of Citic Guoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Yanjing and Citic Guoan.

Diversification Opportunities for Beijing Yanjing and Citic Guoan

-0.65

Correlation Coefficient

Beijing Yanjing  Citic Guoan

Excellent diversification

The 3 months correlation between Beijing and Citic is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Yanjing Brewery and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine and Beijing Yanjing 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 Beijing Yanjing Brewery are associated (or correlated) with Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of Beijing Yanjing i.e., Beijing Yanjing and Citic Guoan go up and down completely randomly.

Pair Corralation between Beijing Yanjing and Citic Guoan

Assuming the 90 days trading horizon Beijing Yanjing Brewery is expected to generate 0.63 times more return on investment than Citic Guoan. However, Beijing Yanjing Brewery is 1.58 times less risky than Citic Guoan. It trades about 0.14 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about -0.06 per unit of risk. If you would invest  1,040  in Beijing Yanjing Brewery on December 2, 2024 and sell it today you would earn a total of  136.00  from holding Beijing Yanjing Brewery or generate 13.08% return on investment over 90 days.

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

Beijing Yanjing Brewery  vs.  Citic Guoan Wine

Beijing Yanjing Brewery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Yanjing Brewery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Yanjing sustained solid returns over the last few months and may actually be approaching a breakup point.

Citic Guoan Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citic Guoan Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Beijing Yanjing and Citic Guoan

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

The idea behind Beijing Yanjing Brewery and Citic Guoan Wine 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..