Correlation Between Citic Guoan and BTG Hotels

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

Diversification Opportunities for Citic Guoan and BTG Hotels

0.94

Correlation Coefficient

Citic Guoan  BTG Hotels

Almost no diversification

The 3 months correlation between Citic and BTG is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and BTG Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTG Hotels Group 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 BTG Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTG Hotels Group has no effect on the direction of Citic Guoan i.e., Citic Guoan and BTG Hotels go up and down completely randomly.

Pair Corralation between Citic Guoan and BTG Hotels

Assuming the 90 days trading horizon Citic Guoan is expected to generate 3.18 times less return on investment than BTG Hotels. But when comparing it to its historical volatility, Citic Guoan Wine is 1.25 times less risky than BTG Hotels. It trades about 0.07 of its potential returns per unit of risk. BTG Hotels Group is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,405  in BTG Hotels Group on September 24, 2024 and sell it today you would earn a total of  109.00  from holding BTG Hotels Group or generate 7.76% return on investment over 90 days.

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

Citic Guoan Wine  vs.  BTG Hotels Group

Citic Guoan Wine

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

BTG Hotels Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BTG Hotels Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BTG Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and BTG Hotels

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

The idea behind Citic Guoan Wine and BTG Hotels Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.