Correlation Between CITIC Guoan and DR

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

Diversification Opportunities for CITIC Guoan and DR

-0.07

Correlation Coefficient

CITIC Guoan  DR

Good diversification

The 3 months correlation between CITIC and DR is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and DR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Limited 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 DR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Limited has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and DR go up and down completely randomly.

Pair Corralation between CITIC Guoan and DR

Assuming the 90 days trading horizon CITIC Guoan Information is expected to under-perform the DR. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Guoan Information is 1.34 times less risky than DR. The stock trades about -0.05 of its potential returns per unit of risk. The DR Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,317  in DR Limited on December 30, 2024 and sell it today you would earn a total of  524.00  from holding DR Limited or generate 22.62% return on investment over 90 days.

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

CITIC Guoan Information  vs.  DR Limited

CITIC Guoan Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Guoan Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

DR Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DR Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DR sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and DR

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

The idea behind CITIC Guoan Information and DR Limited 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.