Correlation Between Citic Guoan and Hangzhou Weiguang

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

Diversification Opportunities for Citic Guoan and Hangzhou Weiguang

0.49

Correlation Coefficient

Citic Guoan  Hangzhou Weiguang

Very weak diversification

The 3 months correlation between Citic and Hangzhou is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Hangzhou Weiguang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Weiguang 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 Hangzhou Weiguang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Weiguang has no effect on the direction of Citic Guoan i.e., Citic Guoan and Hangzhou Weiguang go up and down completely randomly.

Pair Corralation between Citic Guoan and Hangzhou Weiguang

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Hangzhou Weiguang. In addition to that, Citic Guoan is 1.27 times more volatile than Hangzhou Weiguang Electronic. It trades about -0.01 of its total potential returns per unit of risk. Hangzhou Weiguang Electronic is currently generating about 0.13 per unit of volatility. If you would invest  2,024  in Hangzhou Weiguang Electronic on October 15, 2024 and sell it today you would earn a total of  363.00  from holding Hangzhou Weiguang Electronic or generate 17.93% 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.  Hangzhou Weiguang Electronic

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.

Hangzhou Weiguang

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Citic Guoan and Hangzhou Weiguang

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

The idea behind Citic Guoan Wine and Hangzhou Weiguang Electronic 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.