Correlation Between Dongxing Sec and CITIC Guoan

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

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

Diversification Opportunities for Dongxing Sec and CITIC Guoan

0.75

Correlation Coefficient

Dongxing Sec  CITIC Guoan

Poor diversification

The 3 months correlation between Dongxing and CITIC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec 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 Dongxing Sec 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 Dongxing Sec 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 Dongxing Sec i.e., Dongxing Sec and CITIC Guoan go up and down completely randomly.

Pair Corralation between Dongxing Sec and CITIC Guoan

Assuming the 90 days trading horizon Dongxing Sec Co is expected to generate 1.0 times more return on investment than CITIC Guoan. However, Dongxing Sec is 1.0 times more volatile than CITIC Guoan Information. It trades about -0.3 of its potential returns per unit of risk. CITIC Guoan Information is currently generating about -0.51 per unit of risk. If you would invest  1,173  in Dongxing Sec Co on October 9, 2024 and sell it today you would lose (170.00) from holding Dongxing Sec Co or give up 14.49% of portfolio value over 90 days.

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

Dongxing Sec Co  vs.  CITIC Guoan Information

Dongxing Sec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongxing Sec Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dongxing Sec 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 2 (%) 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 February 2025.

Pair Trading with Dongxing Sec and CITIC Guoan

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

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.