Correlation Between Citic Guoan and Guangzhou KingTeller

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

Diversification Opportunities for Citic Guoan and Guangzhou KingTeller

0.68

Correlation Coefficient

Citic Guoan  Guangzhou KingTeller

Poor diversification

The 3 months correlation between Citic and Guangzhou is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Guangzhou KingTeller Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou KingTeller 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 Guangzhou KingTeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou KingTeller has no effect on the direction of Citic Guoan i.e., Citic Guoan and Guangzhou KingTeller go up and down completely randomly.

Pair Corralation between Citic Guoan and Guangzhou KingTeller

Assuming the 90 days trading horizon Citic Guoan Wine is expected to generate 0.75 times more return on investment than Guangzhou KingTeller. However, Citic Guoan Wine is 1.33 times less risky than Guangzhou KingTeller. It trades about 0.05 of its potential returns per unit of risk. Guangzhou KingTeller Technology is currently generating about -0.01 per unit of risk. If you would invest  533.00  in Citic Guoan Wine on December 26, 2024 and sell it today you would earn a total of  29.00  from holding Citic Guoan Wine or generate 5.44% return on investment over 90 days.

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

Citic Guoan Wine  vs.  Guangzhou KingTeller Technolog

Citic Guoan Wine

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Guangzhou KingTeller

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Citic Guoan and Guangzhou KingTeller

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

The idea behind Citic Guoan Wine and Guangzhou KingTeller Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.