Correlation Between Northking Information and Citic Guoan

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

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

Diversification Opportunities for Northking Information and Citic Guoan

0.29

Correlation Coefficient

Northking Information  Citic Guoan

Modest diversification

The 3 months correlation between Northking and Citic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Northking Information Technolo 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 Northking Information 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 Northking Information Technology 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 Northking Information i.e., Northking Information and Citic Guoan go up and down completely randomly.

Pair Corralation between Northking Information and Citic Guoan

Assuming the 90 days trading horizon Northking Information Technology is expected to generate 1.08 times more return on investment than Citic Guoan. However, Northking Information is 1.08 times more volatile than Citic Guoan Wine. It trades about -0.28 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about -0.33 per unit of risk. If you would invest  1,579  in Northking Information Technology on October 6, 2024 and sell it today you would lose (270.00) from holding Northking Information Technology or give up 17.1% of portfolio value over 90 days.

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

Northking Information Technolo  vs.  Citic Guoan Wine

Northking Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northking Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 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 Northking Information and Citic Guoan

The main advantage of trading using opposite Northking Information and Citic Guoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northking Information 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 Northking Information Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.