Correlation Between Guangdong Liantai and Citic Offshore

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

By analyzing existing cross correlation between Guangdong Liantai Environmental and Citic Offshore Helicopter, you can compare the effects of market volatilities on Guangdong Liantai and Citic Offshore 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 Guangdong Liantai with a short position of Citic Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Liantai and Citic Offshore.

Diversification Opportunities for Guangdong Liantai and Citic Offshore

0.54

Correlation Coefficient

Guangdong Liantai  Citic Offshore

Very weak diversification

The 3 months correlation between Guangdong and Citic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Liantai Environmenta and Citic Offshore Helicopter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Offshore Helicopter and Guangdong Liantai 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 Guangdong Liantai Environmental are associated (or correlated) with Citic Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Offshore Helicopter has no effect on the direction of Guangdong Liantai i.e., Guangdong Liantai and Citic Offshore go up and down completely randomly.

Pair Corralation between Guangdong Liantai and Citic Offshore

Assuming the 90 days trading horizon Guangdong Liantai Environmental is expected to generate 0.46 times more return on investment than Citic Offshore. However, Guangdong Liantai Environmental is 2.18 times less risky than Citic Offshore. It trades about 0.02 of its potential returns per unit of risk. Citic Offshore Helicopter is currently generating about -0.06 per unit of risk. If you would invest  404.00  in Guangdong Liantai Environmental on December 25, 2024 and sell it today you would earn a total of  5.00  from holding Guangdong Liantai Environmental or generate 1.24% return on investment over 90 days.

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

Guangdong Liantai Environmenta  vs.  Citic Offshore Helicopter

Guangdong Liantai

Risk-Adjusted Performance

Weak

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

Citic Offshore Helicopter

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citic Offshore Helicopter has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Guangdong Liantai and Citic Offshore

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

The idea behind Guangdong Liantai Environmental and Citic Offshore Helicopter 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.