Correlation Between CITIC Guoan and Hunan Investment

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

By analyzing existing cross correlation between CITIC Guoan Information and Hunan Investment Group, you can compare the effects of market volatilities on CITIC Guoan and Hunan Investment 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 Guoan with a short position of Hunan Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Guoan and Hunan Investment.

Diversification Opportunities for CITIC Guoan and Hunan Investment

0.61

Correlation Coefficient

CITIC Guoan  Hunan Investment

Poor diversification

The 3 months correlation between CITIC and Hunan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Hunan Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Investment and CITIC Guoan 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 Guoan Information are associated (or correlated) with Hunan Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Investment has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Hunan Investment go up and down completely randomly.

Pair Corralation between CITIC Guoan and Hunan Investment

Assuming the 90 days trading horizon CITIC Guoan Information is expected to under-perform the Hunan Investment. In addition to that, CITIC Guoan is 1.06 times more volatile than Hunan Investment Group. It trades about -0.43 of its total potential returns per unit of risk. Hunan Investment Group is currently generating about -0.31 per unit of volatility. If you would invest  587.00  in Hunan Investment Group on October 10, 2024 and sell it today you would lose (89.00) from holding Hunan Investment Group or give up 15.16% of portfolio value over 90 days.

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

CITIC Guoan Information  vs.  Hunan Investment Group

CITIC Guoan Information

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Guoan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hunan Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Investment Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hunan Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CITIC Guoan and Hunan Investment

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

The idea behind CITIC Guoan Information and Hunan Investment Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.