Correlation Between Citic Guoan and Jiangxi Naipu

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

Diversification Opportunities for Citic Guoan and Jiangxi Naipu

0.73

Correlation Coefficient

Citic Guoan  Jiangxi Naipu

Poor diversification

The 3 months correlation between Citic and Jiangxi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Jiangxi Naipu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangxi Naipu Mining 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 Jiangxi Naipu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangxi Naipu Mining has no effect on the direction of Citic Guoan i.e., Citic Guoan and Jiangxi Naipu go up and down completely randomly.

Pair Corralation between Citic Guoan and Jiangxi Naipu

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Jiangxi Naipu. In addition to that, Citic Guoan is 1.87 times more volatile than Jiangxi Naipu Mining. It trades about -0.35 of its total potential returns per unit of risk. Jiangxi Naipu Mining is currently generating about -0.3 per unit of volatility. If you would invest  2,935  in Jiangxi Naipu Mining on October 12, 2024 and sell it today you would lose (279.00) from holding Jiangxi Naipu Mining or give up 9.51% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  Jiangxi Naipu Mining

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.

Jiangxi Naipu Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jiangxi Naipu Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiangxi Naipu 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 Jiangxi Naipu

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

The idea behind Citic Guoan Wine and Jiangxi Naipu Mining 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.