Correlation Between Citic Guoan and Guangdong Brandmax

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

Diversification Opportunities for Citic Guoan and Guangdong Brandmax

0.91

Correlation Coefficient

Citic Guoan  Guangdong Brandmax

Almost no diversification

The 3 months correlation between Citic and Guangdong is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Guangdong Brandmax Marketing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Brandmax 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 Guangdong Brandmax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Brandmax has no effect on the direction of Citic Guoan i.e., Citic Guoan and Guangdong Brandmax go up and down completely randomly.

Pair Corralation between Citic Guoan and Guangdong Brandmax

Assuming the 90 days trading horizon Citic Guoan is expected to generate 2.17 times less return on investment than Guangdong Brandmax. But when comparing it to its historical volatility, Citic Guoan Wine is 1.39 times less risky than Guangdong Brandmax. It trades about 0.15 of its potential returns per unit of risk. Guangdong Brandmax Marketing is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  818.00  in Guangdong Brandmax Marketing on September 4, 2024 and sell it today you would earn a total of  165.00  from holding Guangdong Brandmax Marketing or generate 20.17% return on investment over 90 days.

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

Citic Guoan Wine  vs.  Guangdong Brandmax Marketing

Citic Guoan Wine

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Brandmax

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Brandmax Marketing are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Brandmax sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Guangdong Brandmax

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

The idea behind Citic Guoan Wine and Guangdong Brandmax Marketing 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.