Correlation Between China Citic and Xingguang Agricultural

Can any of the company-specific risk be diversified away by investing in both China Citic and Xingguang Agricultural 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 Xingguang Agricultural 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 Xingguang Agricultural Mach, you can compare the effects of market volatilities on China Citic and Xingguang Agricultural 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 Xingguang Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Citic and Xingguang Agricultural.

Diversification Opportunities for China Citic and Xingguang Agricultural

0.14

Correlation Coefficient

China Citic  Xingguang Agricultural

Average diversification

The 3 months correlation between China and Xingguang is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Xingguang Agricultural Mach in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xingguang Agricultural 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 Xingguang Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xingguang Agricultural has no effect on the direction of China Citic i.e., China Citic and Xingguang Agricultural go up and down completely randomly.

Pair Corralation between China Citic and Xingguang Agricultural

Assuming the 90 days trading horizon China Citic Bank is expected to generate 0.29 times more return on investment than Xingguang Agricultural. However, China Citic Bank is 3.46 times less risky than Xingguang Agricultural. It trades about -0.15 of its potential returns per unit of risk. Xingguang Agricultural Mach is currently generating about -0.27 per unit of risk. If you would invest  711.00  in China Citic Bank on October 10, 2024 and sell it today you would lose (32.00) from holding China Citic Bank or give up 4.5% of portfolio value over 90 days.

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

China Citic Bank  vs.  Xingguang Agricultural Mach

China Citic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Citic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, China Citic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xingguang Agricultural

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xingguang Agricultural Mach are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Xingguang Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Citic and Xingguang Agricultural

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

The idea behind China Citic Bank and Xingguang Agricultural Mach 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..