Correlation Between Tibet Huayu and Citic Guoan

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

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

Diversification Opportunities for Tibet Huayu and Citic Guoan

0.42

Correlation Coefficient

Tibet Huayu  Citic Guoan

Very weak diversification

The 3 months correlation between Tibet and Citic is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tibet Huayu Mining 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 Tibet Huayu 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 Tibet Huayu Mining 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 Tibet Huayu i.e., Tibet Huayu and Citic Guoan go up and down completely randomly.

Pair Corralation between Tibet Huayu and Citic Guoan

Assuming the 90 days trading horizon Tibet Huayu Mining is expected to generate 1.48 times more return on investment than Citic Guoan. However, Tibet Huayu is 1.48 times more volatile than Citic Guoan Wine. It trades about 0.35 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about 0.07 per unit of risk. If you would invest  1,330  in Tibet Huayu Mining on December 24, 2024 and sell it today you would earn a total of  1,225  from holding Tibet Huayu Mining or generate 92.11% return on investment over 90 days.

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

Tibet Huayu Mining  vs.  Citic Guoan Wine

Tibet Huayu Mining

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Tibet Huayu Mining are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tibet Huayu sustained solid returns over the last few months and may actually be approaching a breakup point.

Citic Guoan Wine

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tibet Huayu and Citic Guoan

The main advantage of trading using opposite Tibet Huayu and Citic Guoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tibet Huayu 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 Tibet Huayu Mining 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.