Correlation Between CITIC Guoan and Qijing Machinery

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

Diversification Opportunities for CITIC Guoan and Qijing Machinery

-0.03

Correlation Coefficient

CITIC Guoan  Qijing Machinery

Good diversification

The 3 months correlation between CITIC and Qijing is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Qijing Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qijing Machinery 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 Qijing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qijing Machinery has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Qijing Machinery go up and down completely randomly.

Pair Corralation between CITIC Guoan and Qijing Machinery

Assuming the 90 days trading horizon CITIC Guoan Information is expected to under-perform the Qijing Machinery. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Guoan Information is 1.92 times less risky than Qijing Machinery. The stock trades about -0.04 of its potential returns per unit of risk. The Qijing Machinery is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,259  in Qijing Machinery on December 25, 2024 and sell it today you would earn a total of  1,253  from holding Qijing Machinery or generate 99.52% 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.  Qijing Machinery

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 somewhat strong basic indicators, CITIC Guoan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Qijing Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qijing Machinery are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Qijing Machinery sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and Qijing Machinery

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

The idea behind CITIC Guoan Information and Qijing Machinery 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.