Correlation Between Citic Guoan and Metro Investment

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

Diversification Opportunities for Citic Guoan and Metro Investment

0.69

Correlation Coefficient

Citic Guoan  Metro Investment

Poor diversification

The 3 months correlation between Citic and Metro is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Metro Investment Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Investment Dev 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 Metro Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Investment Dev has no effect on the direction of Citic Guoan i.e., Citic Guoan and Metro Investment go up and down completely randomly.

Pair Corralation between Citic Guoan and Metro Investment

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Metro Investment. But the stock apears to be less risky and, when comparing its historical volatility, Citic Guoan Wine is 1.41 times less risky than Metro Investment. The stock trades about -0.01 of its potential returns per unit of risk. The Metro Investment Development is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  461.00  in Metro Investment Development on October 9, 2024 and sell it today you would lose (82.00) from holding Metro Investment Development or give up 17.79% of portfolio value over 90 days.

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

Citic Guoan Wine  vs.  Metro Investment Development

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.

Metro Investment Dev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Investment Development 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 Metro Investment

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

The idea behind Citic Guoan Wine and Metro Investment Development 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.