Correlation Between CITIC Metal and Anhui Gujing

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

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

Diversification Opportunities for CITIC Metal and Anhui Gujing

0.85

Correlation Coefficient

CITIC Metal  Anhui Gujing

Very poor diversification

The 3 months correlation between CITIC and Anhui is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Metal Co and Anhui Gujing Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Gujing Distillery and CITIC Metal 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 Metal Co are associated (or correlated) with Anhui Gujing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Gujing Distillery has no effect on the direction of CITIC Metal i.e., CITIC Metal and Anhui Gujing go up and down completely randomly.

Pair Corralation between CITIC Metal and Anhui Gujing

Assuming the 90 days trading horizon CITIC Metal Co is expected to under-perform the Anhui Gujing. But the stock apears to be less risky and, when comparing its historical volatility, CITIC Metal Co is 2.02 times less risky than Anhui Gujing. The stock trades about -0.32 of its potential returns per unit of risk. The Anhui Gujing Distillery is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  20,048  in Anhui Gujing Distillery on October 6, 2024 and sell it today you would lose (2,850) from holding Anhui Gujing Distillery or give up 14.22% of portfolio value over 90 days.

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

CITIC Metal Co  vs.  Anhui Gujing Distillery

CITIC Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC Metal Co 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.

Anhui Gujing Distillery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Gujing Distillery 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.

Pair Trading with CITIC Metal and Anhui Gujing

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

The idea behind CITIC Metal Co and Anhui Gujing Distillery 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..