Correlation Between CITIC Guoan and Shandong Polymer

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

Diversification Opportunities for CITIC Guoan and Shandong Polymer

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between CITIC and Shandong is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Shandong Polymer Biochemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Polymer Bio 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 Shandong Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Polymer Bio has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Shandong Polymer go up and down completely randomly.

Pair Corralation between CITIC Guoan and Shandong Polymer

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 1.18 times more return on investment than Shandong Polymer. However, CITIC Guoan is 1.18 times more volatile than Shandong Polymer Biochemicals. It trades about 0.03 of its potential returns per unit of risk. Shandong Polymer Biochemicals is currently generating about -0.01 per unit of risk. If you would invest  342.00  in CITIC Guoan Information on September 22, 2024 and sell it today you would earn a total of  4.00  from holding CITIC Guoan Information or generate 1.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

CITIC Guoan Information  vs.  Shandong Polymer Biochemicals

 Performance 
       Timeline  
CITIC Guoan Information 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 13 (%) 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.
Shandong Polymer Bio 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Polymer Biochemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Polymer sustained solid returns over the last few months and may actually be approaching a breakup point.

CITIC Guoan and Shandong Polymer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CITIC Guoan and Shandong Polymer

The main advantage of trading using opposite CITIC Guoan and Shandong Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Guoan position performs unexpectedly, Shandong Polymer 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 Shandong Polymer will offset losses from the drop in Shandong Polymer's long position.
The idea behind CITIC Guoan Information and Shandong Polymer Biochemicals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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