Correlation Between China Citic and Beijing Kaiwen

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

By analyzing existing cross correlation between China Citic Bank and Beijing Kaiwen Education, you can compare the effects of market volatilities on China Citic and Beijing Kaiwen 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 China Citic with a short position of Beijing Kaiwen. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Citic and Beijing Kaiwen.

Diversification Opportunities for China Citic and Beijing Kaiwen

0.86

Correlation Coefficient

China Citic  Beijing Kaiwen

Very poor diversification

The 3 months correlation between China and Beijing is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Beijing Kaiwen Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Kaiwen Education and China Citic 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 China Citic Bank are associated (or correlated) with Beijing Kaiwen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Kaiwen Education has no effect on the direction of China Citic i.e., China Citic and Beijing Kaiwen go up and down completely randomly.

Pair Corralation between China Citic and Beijing Kaiwen

Assuming the 90 days trading horizon China Citic is expected to generate 1.75 times less return on investment than Beijing Kaiwen. But when comparing it to its historical volatility, China Citic Bank is 2.0 times less risky than Beijing Kaiwen. It trades about 0.2 of its potential returns per unit of risk. Beijing Kaiwen Education is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  377.00  in Beijing Kaiwen Education on September 12, 2024 and sell it today you would earn a total of  172.00  from holding Beijing Kaiwen Education or generate 45.62% return on investment over 90 days.

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

China Citic Bank  vs.  Beijing Kaiwen Education

China Citic Bank

Risk-Adjusted Performance

15 of 100

Good

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

Beijing Kaiwen Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Kaiwen Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Beijing Kaiwen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Citic and Beijing Kaiwen

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

The idea behind China Citic Bank and Beijing Kaiwen Education 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 Stocks Directory module to find actively traded stocks across global markets.