Correlation Between Citic Guoan and Jizhong Energy

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

Diversification Opportunities for Citic Guoan and Jizhong Energy

0.55

Correlation Coefficient

Citic Guoan  Jizhong Energy

Very weak diversification

The 3 months correlation between Citic and Jizhong is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Jizhong Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jizhong Energy Resources 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 Jizhong Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jizhong Energy Resources has no effect on the direction of Citic Guoan i.e., Citic Guoan and Jizhong Energy go up and down completely randomly.

Pair Corralation between Citic Guoan and Jizhong Energy

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Jizhong Energy. In addition to that, Citic Guoan is 1.48 times more volatile than Jizhong Energy Resources. It trades about -0.02 of its total potential returns per unit of risk. Jizhong Energy Resources is currently generating about 0.04 per unit of volatility. If you would invest  487.00  in Jizhong Energy Resources on October 9, 2024 and sell it today you would earn a total of  155.00  from holding Jizhong Energy Resources or generate 31.83% return on investment over 90 days.

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

Citic Guoan Wine  vs.  Jizhong Energy Resources

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.

Jizhong Energy Resources

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Citic Guoan and Jizhong Energy

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

The idea behind Citic Guoan Wine and Jizhong Energy Resources 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.