Correlation Between BTG Hotels and Citic Guoan

Can any of the company-specific risk be diversified away by investing in both BTG Hotels and Citic Guoan 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 BTG Hotels and Citic Guoan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BTG Hotels Group and Citic Guoan Wine, you can compare the effects of market volatilities on BTG Hotels and Citic Guoan 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 BTG Hotels with a short position of Citic Guoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTG Hotels and Citic Guoan.

Diversification Opportunities for BTG Hotels and Citic Guoan

0.73

Correlation Coefficient

BTG Hotels  Citic Guoan

Poor diversification

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

Pair Corralation between BTG Hotels and Citic Guoan

Assuming the 90 days trading horizon BTG Hotels Group is expected to under-perform the Citic Guoan. But the stock apears to be less risky and, when comparing its historical volatility, BTG Hotels Group is 1.27 times less risky than Citic Guoan. The stock trades about -0.01 of its potential returns per unit of risk. The Citic Guoan Wine is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  522.00  in Citic Guoan Wine on October 12, 2024 and sell it today you would lose (9.00) from holding Citic Guoan Wine or give up 1.72% of portfolio value over 90 days.

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

BTG Hotels Group  vs.  Citic Guoan Wine

BTG Hotels Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BTG Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BTG Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with BTG Hotels and Citic Guoan

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

The idea behind BTG Hotels Group and Citic Guoan Wine 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..