Correlation Between Citic Guoan and Kunshan Guoli

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

Diversification Opportunities for Citic Guoan and Kunshan Guoli

0.73

Correlation Coefficient

Citic Guoan  Kunshan Guoli

Poor diversification

The 3 months correlation between Citic and Kunshan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Kunshan Guoli Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunshan Guoli Electronic 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 Kunshan Guoli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunshan Guoli Electronic has no effect on the direction of Citic Guoan i.e., Citic Guoan and Kunshan Guoli go up and down completely randomly.

Pair Corralation between Citic Guoan and Kunshan Guoli

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Kunshan Guoli. But the stock apears to be less risky and, when comparing its historical volatility, Citic Guoan Wine is 1.36 times less risky than Kunshan Guoli. The stock trades about -0.02 of its potential returns per unit of risk. The Kunshan Guoli Electronic is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,640  in Kunshan Guoli Electronic on September 28, 2024 and sell it today you would earn a total of  468.00  from holding Kunshan Guoli Electronic or generate 12.86% 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.  Kunshan Guoli Electronic

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.

Kunshan Guoli Electronic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kunshan Guoli Electronic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kunshan Guoli sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Kunshan Guoli

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

The idea behind Citic Guoan Wine and Kunshan Guoli Electronic 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.