Correlation Between Citic Guoan and Inner Mongolia

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

Diversification Opportunities for Citic Guoan and Inner Mongolia

0.45

Correlation Coefficient

Citic Guoan  Inner Mongolia

Very weak diversification

The 3 months correlation between Citic and Inner is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Inner Mongolia Furui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inner Mongolia Furui 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 Inner Mongolia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inner Mongolia Furui has no effect on the direction of Citic Guoan i.e., Citic Guoan and Inner Mongolia go up and down completely randomly.

Pair Corralation between Citic Guoan and Inner Mongolia

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Inner Mongolia. In addition to that, Citic Guoan is 1.02 times more volatile than Inner Mongolia Furui. It trades about -0.18 of its total potential returns per unit of risk. Inner Mongolia Furui is currently generating about -0.15 per unit of volatility. If you would invest  3,388  in Inner Mongolia Furui on October 25, 2024 and sell it today you would lose (271.00) from holding Inner Mongolia Furui or give up 8.0% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  Inner Mongolia Furui

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Inner Mongolia Furui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inner Mongolia Furui has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citic Guoan and Inner Mongolia

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

The idea behind Citic Guoan Wine and Inner Mongolia Furui 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.