Correlation Between Guangdong Lvtong and Citic Guoan

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

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

Diversification Opportunities for Guangdong Lvtong and Citic Guoan

0.66

Correlation Coefficient

Guangdong Lvtong  Citic Guoan

Poor diversification

The 3 months correlation between Guangdong and Citic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Lvtong New 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 Guangdong Lvtong 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 Guangdong Lvtong New 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 Guangdong Lvtong i.e., Guangdong Lvtong and Citic Guoan go up and down completely randomly.

Pair Corralation between Guangdong Lvtong and Citic Guoan

Assuming the 90 days trading horizon Guangdong Lvtong New is expected to under-perform the Citic Guoan. In addition to that, Guangdong Lvtong is 1.2 times more volatile than Citic Guoan Wine. It trades about -0.05 of its total potential returns per unit of risk. Citic Guoan Wine is currently generating about -0.01 per unit of volatility. If you would invest  706.00  in Citic Guoan Wine on October 12, 2024 and sell it today you would lose (193.00) from holding Citic Guoan Wine or give up 27.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.76%
Values	Daily Returns

Guangdong Lvtong New  vs.  Citic Guoan Wine

Guangdong Lvtong New

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Guangdong Lvtong New has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Guangdong Lvtong 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 Guangdong Lvtong and Citic Guoan

The main advantage of trading using opposite Guangdong Lvtong and Citic Guoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Lvtong 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 Guangdong Lvtong New 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.