Correlation Between Citic Guoan and Dongguan Tarry

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

Diversification Opportunities for Citic Guoan and Dongguan Tarry

0.3

Correlation Coefficient

Citic Guoan  Dongguan Tarry

Weak diversification

The 3 months correlation between Citic and Dongguan is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Dongguan Tarry Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Tarry Elect 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 Dongguan Tarry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Tarry Elect has no effect on the direction of Citic Guoan i.e., Citic Guoan and Dongguan Tarry go up and down completely randomly.

Pair Corralation between Citic Guoan and Dongguan Tarry

Assuming the 90 days trading horizon Citic Guoan Wine is expected to generate 0.9 times more return on investment than Dongguan Tarry. However, Citic Guoan Wine is 1.12 times less risky than Dongguan Tarry. It trades about 0.02 of its potential returns per unit of risk. Dongguan Tarry Electronics is currently generating about -0.02 per unit of risk. If you would invest  544.00  in Citic Guoan Wine on December 24, 2024 and sell it today you would earn a total of  8.00  from holding Citic Guoan Wine or generate 1.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Citic Guoan Wine  vs.  Dongguan Tarry Electronics

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 1 (%) 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.

Dongguan Tarry Elect

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Citic Guoan Wine and Dongguan Tarry Electronics 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.