Correlation Between Shandong Longquan and Citic Guoan

Can any of the company-specific risk be diversified away by investing in both Shandong Longquan and Citic Guoan 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 Shandong Longquan and Citic Guoan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Longquan Pipeline and Citic Guoan Wine, you can compare the effects of market volatilities on Shandong Longquan and Citic Guoan 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 Shandong Longquan with a short position of Citic Guoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Longquan and Citic Guoan.

Diversification Opportunities for Shandong Longquan and Citic Guoan

0.86

Correlation Coefficient

Shandong Longquan  Citic Guoan

Very poor diversification

The 3 months correlation between Shandong and Citic is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Longquan Pipeline and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine and Shandong Longquan 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 Shandong Longquan Pipeline are associated (or correlated) with Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of Shandong Longquan i.e., Shandong Longquan and Citic Guoan go up and down completely randomly.

Pair Corralation between Shandong Longquan and Citic Guoan

Assuming the 90 days trading horizon Shandong Longquan Pipeline is expected to generate 1.0 times more return on investment than Citic Guoan. However, Shandong Longquan is 1.0 times more volatile than Citic Guoan Wine. It trades about 0.06 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about 0.0 per unit of risk. If you would invest  414.00  in Shandong Longquan Pipeline on October 12, 2024 and sell it today you would earn a total of  35.00  from holding Shandong Longquan Pipeline or generate 8.45% return on investment over 90 days.

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

Shandong Longquan Pipeline  vs.  Citic Guoan Wine

Shandong Longquan

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Longquan Pipeline are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Longquan may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Citic Guoan Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citic Guoan Wine 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.

Pair Trading with Shandong Longquan and Citic Guoan

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

The idea behind Shandong Longquan Pipeline and Citic Guoan Wine 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.