Correlation Between Kweichow Moutai and CITIC Guoan

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

By analyzing existing cross correlation between Kweichow Moutai Co and CITIC Guoan Information, you can compare the effects of market volatilities on Kweichow Moutai 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 Kweichow Moutai with a short position of CITIC Guoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and CITIC Guoan.

Diversification Opportunities for Kweichow Moutai and CITIC Guoan

0.76

Correlation Coefficient

Kweichow Moutai  CITIC Guoan

Poor diversification

The 3 months correlation between Kweichow and CITIC is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and CITIC Guoan Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Guoan Information and Kweichow Moutai 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 Kweichow Moutai Co 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 Information has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and CITIC Guoan go up and down completely randomly.

Pair Corralation between Kweichow Moutai and CITIC Guoan

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 0.42 times more return on investment than CITIC Guoan. However, Kweichow Moutai Co is 2.37 times less risky than CITIC Guoan. It trades about -0.02 of its potential returns per unit of risk. CITIC Guoan Information is currently generating about -0.09 per unit of risk. If you would invest  152,674  in Kweichow Moutai Co on December 3, 2024 and sell it today you would lose (2,595) from holding Kweichow Moutai Co or give up 1.7% of portfolio value over 90 days.

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

Kweichow Moutai Co  vs.  CITIC Guoan Information

Kweichow Moutai

Risk-Adjusted Performance

Very Weak

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

CITIC Guoan Information

Risk-Adjusted Performance

Very Weak

Over the last 90 days CITIC Guoan Information 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kweichow Moutai and CITIC Guoan

The main advantage of trading using opposite Kweichow Moutai and CITIC Guoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kweichow Moutai 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 Kweichow Moutai Co and CITIC Guoan Information 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.