Correlation Between Citic Guoan and Keda Clean

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

Diversification Opportunities for Citic Guoan and Keda Clean

0.83

Correlation Coefficient

Citic Guoan  Keda Clean

Very poor diversification

The 3 months correlation between Citic and Keda is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Keda Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keda Clean Energy 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 Keda Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keda Clean Energy has no effect on the direction of Citic Guoan i.e., Citic Guoan and Keda Clean go up and down completely randomly.

Pair Corralation between Citic Guoan and Keda Clean

Assuming the 90 days trading horizon Citic Guoan Wine is expected to generate 1.27 times more return on investment than Keda Clean. However, Citic Guoan is 1.27 times more volatile than Keda Clean Energy. It trades about -0.01 of its potential returns per unit of risk. Keda Clean Energy is currently generating about -0.05 per unit of risk. If you would invest  740.00  in Citic Guoan Wine on September 28, 2024 and sell it today you would lose (207.00) from holding Citic Guoan Wine or give up 27.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Citic Guoan Wine  vs.  Keda Clean Energy

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.

Keda Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keda Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citic Guoan and Keda Clean

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

The idea behind Citic Guoan Wine and Keda Clean Energy 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.