Correlation Between CITIC Guoan and Tianshui Huatian

Can any of the company-specific risk be diversified away by investing in both CITIC Guoan and Tianshui Huatian 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 Tianshui Huatian 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 Tianshui Huatian Technology, you can compare the effects of market volatilities on CITIC Guoan and Tianshui Huatian 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 Tianshui Huatian. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Guoan and Tianshui Huatian.

Diversification Opportunities for CITIC Guoan and Tianshui Huatian

0.87

Correlation Coefficient

CITIC Guoan  Tianshui Huatian

Very poor diversification

The 3 months correlation between CITIC and Tianshui is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Tianshui Huatian Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianshui Huatian Tec 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 Tianshui Huatian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianshui Huatian Tec has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Tianshui Huatian go up and down completely randomly.

Pair Corralation between CITIC Guoan and Tianshui Huatian

Assuming the 90 days trading horizon CITIC Guoan Information is expected to under-perform the Tianshui Huatian. In addition to that, CITIC Guoan is 1.0 times more volatile than Tianshui Huatian Technology. It trades about -0.44 of its total potential returns per unit of risk. Tianshui Huatian Technology is currently generating about -0.18 per unit of volatility. If you would invest  1,195  in Tianshui Huatian Technology on October 11, 2024 and sell it today you would lose (117.00) from holding Tianshui Huatian Technology or give up 9.79% of portfolio value over 90 days.

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

CITIC Guoan Information  vs.  Tianshui Huatian Technology

CITIC Guoan Information

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Tianshui Huatian Tec

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tianshui Huatian Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianshui Huatian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and Tianshui Huatian

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

The idea behind CITIC Guoan Information and Tianshui Huatian Technology 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.