Correlation Between Citic Guoan and China Petroleum

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

Diversification Opportunities for Citic Guoan and China Petroleum

-0.58

Correlation Coefficient

Citic Guoan  China Petroleum

Excellent diversification

The 3 months correlation between Citic and China is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Citic Guoan i.e., Citic Guoan and China Petroleum go up and down completely randomly.

Pair Corralation between Citic Guoan and China Petroleum

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the China Petroleum. In addition to that, Citic Guoan is 2.17 times more volatile than China Petroleum Chemical. It trades about -0.02 of its total potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.0 per unit of volatility. If you would invest  658.00  in China Petroleum Chemical on October 9, 2024 and sell it today you would lose (2.00) from holding China Petroleum Chemical or give up 0.3% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  China Petroleum Chemical

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.

China Petroleum Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Citic Guoan Wine and China Petroleum Chemical 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.