Correlation Between Citic Guoan and Zhejiang Kingland

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

Diversification Opportunities for Citic Guoan and Zhejiang Kingland

0.55

Correlation Coefficient

Citic Guoan  Zhejiang Kingland

Very weak diversification

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

Pair Corralation between Citic Guoan and Zhejiang Kingland

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Zhejiang Kingland. In addition to that, Citic Guoan is 1.59 times more volatile than Zhejiang Kingland Pipeline. It trades about -0.16 of its total potential returns per unit of risk. Zhejiang Kingland Pipeline is currently generating about -0.12 per unit of volatility. If you would invest  614.00  in Zhejiang Kingland Pipeline on September 27, 2024 and sell it today you would lose (27.00) from holding Zhejiang Kingland Pipeline or give up 4.4% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  Zhejiang Kingland Pipeline

Citic Guoan Wine

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Zhejiang Kingland

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Kingland Pipeline are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Zhejiang Kingland 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 Zhejiang Kingland

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

The idea behind Citic Guoan Wine and Zhejiang Kingland Pipeline 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.