Correlation Between CITIC Guoan and Guangdong Liantai

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

Diversification Opportunities for CITIC Guoan and Guangdong Liantai

0.93

Correlation Coefficient

CITIC Guoan  Guangdong Liantai

Almost no diversification

The 3 months correlation between CITIC and Guangdong is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Guangdong Liantai Environmenta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Liantai 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 Guangdong Liantai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Liantai has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Guangdong Liantai go up and down completely randomly.

Pair Corralation between CITIC Guoan and Guangdong Liantai

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 1.23 times more return on investment than Guangdong Liantai. However, CITIC Guoan is 1.23 times more volatile than Guangdong Liantai Environmental. It trades about 0.05 of its potential returns per unit of risk. Guangdong Liantai Environmental is currently generating about -0.01 per unit of risk. If you would invest  250.00  in CITIC Guoan Information on September 13, 2024 and sell it today you would earn a total of  120.00  from holding CITIC Guoan Information or generate 48.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

CITIC Guoan Information  vs.  Guangdong Liantai Environmenta

CITIC Guoan Information

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Liantai

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Liantai Environmental are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Liantai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and Guangdong Liantai

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

The idea behind CITIC Guoan Information and Guangdong Liantai Environmental 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..