Correlation Between CITIC Guoan and Lecron Energy

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

Diversification Opportunities for CITIC Guoan and Lecron Energy

0.64

Correlation Coefficient

CITIC Guoan  Lecron Energy

Poor diversification

The 3 months correlation between CITIC and Lecron is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Lecron Energy Saving in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lecron Energy Saving 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 Lecron Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lecron Energy Saving has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Lecron Energy go up and down completely randomly.

Pair Corralation between CITIC Guoan and Lecron Energy

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 0.97 times more return on investment than Lecron Energy. However, CITIC Guoan Information is 1.03 times less risky than Lecron Energy. It trades about -0.43 of its potential returns per unit of risk. Lecron Energy Saving is currently generating about -0.5 per unit of risk. If you would invest  360.00  in CITIC Guoan Information on October 9, 2024 and sell it today you would lose (76.00) from holding CITIC Guoan Information or give up 21.11% 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.  Lecron Energy Saving

CITIC Guoan Information

Risk-Adjusted Performance

3 of 100

Weak

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.

Lecron Energy Saving

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lecron Energy Saving has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lecron Energy 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 Lecron Energy

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

The idea behind CITIC Guoan Information and Lecron Energy Saving 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.