Correlation Between Citic Guoan and Dr Peng

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

Diversification Opportunities for Citic Guoan and Dr Peng

0.67

Correlation Coefficient

Citic Guoan  Dr Peng

Poor diversification

The 3 months correlation between Citic and 600804 is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Dr Peng Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Peng Telecom 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 Dr Peng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Peng Telecom has no effect on the direction of Citic Guoan i.e., Citic Guoan and Dr Peng go up and down completely randomly.

Pair Corralation between Citic Guoan and Dr Peng

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Dr Peng. But the stock apears to be less risky and, when comparing its historical volatility, Citic Guoan Wine is 1.47 times less risky than Dr Peng. The stock trades about -0.1 of its potential returns per unit of risk. The Dr Peng Telecom is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Dr Peng Telecom on October 7, 2024 and sell it today you would earn a total of  45.00  from holding Dr Peng Telecom or generate 27.11% return on investment over 90 days.

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

Citic Guoan Wine  vs.  Dr Peng Telecom

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 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.

Dr Peng Telecom

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Peng Telecom are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dr Peng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Dr Peng

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

The idea behind Citic Guoan Wine and Dr Peng Telecom 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.