Correlation Between Citic Guoan and Kweichow Moutai

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

Diversification Opportunities for Citic Guoan and Kweichow Moutai

0.31

Correlation Coefficient

Citic Guoan  Kweichow Moutai

Weak diversification

The 3 months correlation between Citic and Kweichow is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Kweichow Moutai Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kweichow Moutai 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 Kweichow Moutai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kweichow Moutai has no effect on the direction of Citic Guoan i.e., Citic Guoan and Kweichow Moutai go up and down completely randomly.

Pair Corralation between Citic Guoan and Kweichow Moutai

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Kweichow Moutai. In addition to that, Citic Guoan is 2.22 times more volatile than Kweichow Moutai Co. It trades about -0.35 of its total potential returns per unit of risk. Kweichow Moutai Co is currently generating about -0.22 per unit of volatility. If you would invest  153,560  in Kweichow Moutai Co on October 12, 2024 and sell it today you would lose (9,160) from holding Kweichow Moutai Co or give up 5.97% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  Kweichow Moutai Co

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.

Kweichow Moutai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kweichow Moutai Co 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 Kweichow Moutai

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

The idea behind Citic Guoan Wine and Kweichow Moutai Co 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.