Correlation Between CITIC Guoan and Air China

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

Diversification Opportunities for CITIC Guoan and Air China

-0.02

Correlation Coefficient

CITIC Guoan  Air China

Good diversification

The 3 months correlation between CITIC and Air is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Air China Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air China 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 Air China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air China has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Air China go up and down completely randomly.

Pair Corralation between CITIC Guoan and Air China

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 1.3 times more return on investment than Air China. However, CITIC Guoan is 1.3 times more volatile than Air China Ltd. It trades about -0.05 of its potential returns per unit of risk. Air China Ltd is currently generating about -0.08 per unit of risk. If you would invest  315.00  in CITIC Guoan Information on December 30, 2024 and sell it today you would lose (27.00) from holding CITIC Guoan Information or give up 8.57% of portfolio value over 90 days.

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

CITIC Guoan Information  vs.  Air China Ltd

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.

Air China

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air China Ltd 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.

Pair Trading with CITIC Guoan and Air China

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

The idea behind CITIC Guoan Information and Air China Ltd 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.