Correlation Between Citic Guoan and Tianjin Ruixin

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

Diversification Opportunities for Citic Guoan and Tianjin Ruixin

0.87

Correlation Coefficient

Citic Guoan  Tianjin Ruixin

Very poor diversification

The 3 months correlation between Citic and Tianjin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Tianjin Ruixin Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tianjin Ruixin Technology 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 Tianjin Ruixin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tianjin Ruixin Technology has no effect on the direction of Citic Guoan i.e., Citic Guoan and Tianjin Ruixin go up and down completely randomly.

Pair Corralation between Citic Guoan and Tianjin Ruixin

Assuming the 90 days trading horizon Citic Guoan is expected to generate 2.62 times less return on investment than Tianjin Ruixin. But when comparing it to its historical volatility, Citic Guoan Wine is 1.12 times less risky than Tianjin Ruixin. It trades about 0.04 of its potential returns per unit of risk. Tianjin Ruixin Technology is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,530  in Tianjin Ruixin Technology on December 25, 2024 and sell it today you would earn a total of  177.00  from holding Tianjin Ruixin Technology or generate 11.57% return on investment over 90 days.

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

Citic Guoan Wine  vs.  Tianjin Ruixin Technology

Citic Guoan Wine

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 2 (%) 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.

Tianjin Ruixin Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tianjin Ruixin Technology are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tianjin Ruixin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Tianjin Ruixin

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

The idea behind Citic Guoan Wine and Tianjin Ruixin Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.