Correlation Between CITIC Guoan and Shenzhen Zhongzhuang

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

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

Diversification Opportunities for CITIC Guoan and Shenzhen Zhongzhuang

0.8

Correlation Coefficient

CITIC Guoan  Shenzhen Zhongzhuang

Very poor diversification

The 3 months correlation between CITIC and Shenzhen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Shenzhen Zhongzhuang Construct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Zhongzhuang and CITIC Guoan 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 CITIC Guoan Information are associated (or correlated) with Shenzhen Zhongzhuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Zhongzhuang has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Shenzhen Zhongzhuang go up and down completely randomly.

Pair Corralation between CITIC Guoan and Shenzhen Zhongzhuang

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 0.78 times more return on investment than Shenzhen Zhongzhuang. However, CITIC Guoan Information is 1.28 times less risky than Shenzhen Zhongzhuang. It trades about 0.08 of its potential returns per unit of risk. Shenzhen Zhongzhuang Construction is currently generating about 0.02 per unit of risk. If you would invest  227.00  in CITIC Guoan Information on September 13, 2024 and sell it today you would earn a total of  143.00  from holding CITIC Guoan Information or generate 63.0% return on investment over 90 days.

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

CITIC Guoan Information  vs.  Shenzhen Zhongzhuang Construct

CITIC Guoan Information

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information 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.

Shenzhen Zhongzhuang

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Zhongzhuang Construction are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Zhongzhuang sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and Shenzhen Zhongzhuang

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

The idea behind CITIC Guoan Information and Shenzhen Zhongzhuang Construction 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.