Correlation Between CITIC Guoan and Shenzhen Aisidi

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

Diversification Opportunities for CITIC Guoan and Shenzhen Aisidi

0.78

Correlation Coefficient

CITIC Guoan  Shenzhen Aisidi

Poor diversification

The 3 months correlation between CITIC and Shenzhen is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Shenzhen Aisidi Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Aisidi 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 Shenzhen Aisidi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Aisidi has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Shenzhen Aisidi go up and down completely randomly.

Pair Corralation between CITIC Guoan and Shenzhen Aisidi

Assuming the 90 days trading horizon CITIC Guoan Information is expected to under-perform the Shenzhen Aisidi. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Guoan Information is 2.12 times less risky than Shenzhen Aisidi. The stock trades about -0.51 of its potential returns per unit of risk. The Shenzhen Aisidi Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,483  in Shenzhen Aisidi Co on October 9, 2024 and sell it today you would lose (40.00) from holding Shenzhen Aisidi Co or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

CITIC Guoan Information  vs.  Shenzhen Aisidi Co

CITIC Guoan Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 2 (%) 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.

Shenzhen Aisidi

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with CITIC Guoan and Shenzhen Aisidi

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

The idea behind CITIC Guoan Information and Shenzhen Aisidi Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.