Correlation Between Jiangxi Naipu and Citic Guoan

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

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

Diversification Opportunities for Jiangxi Naipu and Citic Guoan

0.73

Correlation Coefficient

Jiangxi Naipu  Citic Guoan

Poor diversification

The 3 months correlation between Jiangxi and Citic is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Jiangxi Naipu Mining 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 Jiangxi Naipu 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 Jiangxi Naipu Mining 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 Jiangxi Naipu i.e., Jiangxi Naipu and Citic Guoan go up and down completely randomly.

Pair Corralation between Jiangxi Naipu and Citic Guoan

Assuming the 90 days trading horizon Jiangxi Naipu Mining is expected to generate 0.53 times more return on investment than Citic Guoan. However, Jiangxi Naipu Mining is 1.87 times less risky than Citic Guoan. It trades about -0.3 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about -0.35 per unit of risk. If you would invest  2,935  in Jiangxi Naipu Mining on October 12, 2024 and sell it today you would lose (279.00) from holding Jiangxi Naipu Mining or give up 9.51% of portfolio value over 90 days.

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

Jiangxi Naipu Mining  vs.  Citic Guoan Wine

Jiangxi Naipu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Naipu Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangxi Naipu is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 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 Jiangxi Naipu and Citic Guoan

The main advantage of trading using opposite Jiangxi Naipu and Citic Guoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jiangxi Naipu 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 Jiangxi Naipu Mining 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.