Correlation Between Citic Guoan and Zhongshan Public

Can any of the company-specific risk be diversified away by investing in both Citic Guoan and Zhongshan Public 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 Zhongshan Public 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 Zhongshan Public Utilities, you can compare the effects of market volatilities on Citic Guoan and Zhongshan Public 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 Zhongshan Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Guoan and Zhongshan Public.

Diversification Opportunities for Citic Guoan and Zhongshan Public

0.83

Correlation Coefficient

Citic Guoan  Zhongshan Public

Very poor diversification

The 3 months correlation between Citic and Zhongshan is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Zhongshan Public Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhongshan Public Uti 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 Zhongshan Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhongshan Public Uti has no effect on the direction of Citic Guoan i.e., Citic Guoan and Zhongshan Public go up and down completely randomly.

Pair Corralation between Citic Guoan and Zhongshan Public

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Zhongshan Public. In addition to that, Citic Guoan is 1.93 times more volatile than Zhongshan Public Utilities. It trades about -0.11 of its total potential returns per unit of risk. Zhongshan Public Utilities is currently generating about 0.26 per unit of volatility. If you would invest  866.00  in Zhongshan Public Utilities on September 25, 2024 and sell it today you would earn a total of  65.00  from holding Zhongshan Public Utilities or generate 7.51% return on investment over 90 days.

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

Citic Guoan Wine  vs.  Zhongshan Public Utilities

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.

Zhongshan Public Uti

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhongshan Public Utilities are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhongshan Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Zhongshan Public

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

The idea behind Citic Guoan Wine and Zhongshan Public Utilities 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.