Correlation Between CITIC Guoan and China Aluminum

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

Diversification Opportunities for CITIC Guoan and China Aluminum

0.88

Correlation Coefficient

CITIC Guoan  China Aluminum

Very poor diversification

The 3 months correlation between CITIC and China is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and China Aluminum International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Aluminum Inter 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 China Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Aluminum Inter has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and China Aluminum go up and down completely randomly.

Pair Corralation between CITIC Guoan and China Aluminum

Assuming the 90 days trading horizon CITIC Guoan Information is expected to under-perform the China Aluminum. In addition to that, CITIC Guoan is 1.81 times more volatile than China Aluminum International. It trades about -0.05 of its total potential returns per unit of risk. China Aluminum International is currently generating about -0.01 per unit of volatility. If you would invest  453.00  in China Aluminum International on December 24, 2024 and sell it today you would lose (5.00) from holding China Aluminum International or give up 1.1% 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.  China Aluminum International

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.

China Aluminum Inter

Risk-Adjusted Performance

Very Weak

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

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

The idea behind CITIC Guoan Information and China Aluminum International 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.