Correlation Between Citic Guoan and Tibet Huayu

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

Diversification Opportunities for Citic Guoan and Tibet Huayu

0.75

Correlation Coefficient

Citic Guoan  Tibet Huayu

Poor diversification

The 3 months correlation between Citic and Tibet is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Tibet Huayu Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tibet Huayu Mining 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 Tibet Huayu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tibet Huayu Mining has no effect on the direction of Citic Guoan i.e., Citic Guoan and Tibet Huayu go up and down completely randomly.

Pair Corralation between Citic Guoan and Tibet Huayu

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Tibet Huayu. But the stock apears to be less risky and, when comparing its historical volatility, Citic Guoan Wine is 1.3 times less risky than Tibet Huayu. The stock trades about -0.03 of its potential returns per unit of risk. The Tibet Huayu Mining is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,142  in Tibet Huayu Mining on October 25, 2024 and sell it today you would earn a total of  179.00  from holding Tibet Huayu Mining or generate 15.67% 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.  Tibet Huayu Mining

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tibet Huayu Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citic Guoan and Tibet Huayu

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

The idea behind Citic Guoan Wine and Tibet Huayu Mining 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.