Correlation Between Citic Guoan and NBTM New

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

Diversification Opportunities for Citic Guoan and NBTM New

0.4

Correlation Coefficient

Citic Guoan  NBTM New

Very weak diversification

The 3 months correlation between Citic and NBTM is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and NBTM New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBTM New Materials 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 NBTM New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBTM New Materials has no effect on the direction of Citic Guoan i.e., Citic Guoan and NBTM New go up and down completely randomly.

Pair Corralation between Citic Guoan and NBTM New

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the NBTM New. But the stock apears to be less risky and, when comparing its historical volatility, Citic Guoan Wine is 1.09 times less risky than NBTM New. The stock trades about -0.08 of its potential returns per unit of risk. The NBTM New Materials is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,808  in NBTM New Materials on October 25, 2024 and sell it today you would lose (86.00) from holding NBTM New Materials or give up 4.76% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  NBTM New Materials

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NBTM New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Citic Guoan Wine and NBTM New Materials 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.