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 Wine, 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

0.89

Correlation Coefficient

Dongxing Sec  Citic Guoan

Very poor diversification

The 3 months correlation between Dongxing and Citic is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Dongxing Sec Co 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 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 Wine 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 1.33 times more return on investment than Citic Guoan. However, Dongxing Sec is 1.33 times more volatile than Citic Guoan Wine. It trades about 0.19 of its potential returns per unit of risk. Citic Guoan Wine is currently generating about 0.22 per unit of risk. If you would invest  808.00  in Dongxing Sec Co on September 14, 2024 and sell it today you would earn a total of  400.00  from holding Dongxing Sec Co or generate 49.5% return on investment over 90 days.

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

Dongxing Sec Co  vs.  Citic Guoan Wine

Dongxing Sec

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dongxing Sec Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Dongxing Sec sustained solid returns over the last few months and may actually be approaching a breakup point.

Citic Guoan Wine

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan sustained solid returns over the last few months and may actually be approaching a breakup point.

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 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.