Correlation Between Citic Guoan and Zangge Holding

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

By analyzing existing cross correlation between Citic Guoan Wine and Zangge Holding Co, you can compare the effects of market volatilities on Citic Guoan and Zangge Holding 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 Zangge Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Guoan and Zangge Holding.

Diversification Opportunities for Citic Guoan and Zangge Holding

0.76

Correlation Coefficient

Citic Guoan  Zangge Holding

Poor diversification

The 3 months correlation between Citic and Zangge is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Zangge Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zangge Holding 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 Wine are associated (or correlated) with Zangge Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zangge Holding has no effect on the direction of Citic Guoan i.e., Citic Guoan and Zangge Holding go up and down completely randomly.

Pair Corralation between Citic Guoan and Zangge Holding

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Zangge Holding. In addition to that, Citic Guoan is 1.82 times more volatile than Zangge Holding Co. It trades about -0.11 of its total potential returns per unit of risk. Zangge Holding Co is currently generating about -0.15 per unit of volatility. If you would invest  2,828  in Zangge Holding Co on September 25, 2024 and sell it today you would lose (129.00) from holding Zangge Holding Co or give up 4.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Citic Guoan Wine  vs.  Zangge Holding Co

Citic Guoan Wine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 5 (%) 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.

Zangge Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zangge Holding Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zangge Holding may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citic Guoan and Zangge Holding

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

The idea behind Citic Guoan Wine and Zangge Holding Co 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.