Correlation Between CITIC Guoan and GKHT Medical

Can any of the company-specific risk be diversified away by investing in both CITIC Guoan and GKHT Medical 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 GKHT Medical 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 GKHT Medical Technology, you can compare the effects of market volatilities on CITIC Guoan and GKHT Medical 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 GKHT Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Guoan and GKHT Medical.

Diversification Opportunities for CITIC Guoan and GKHT Medical

0.86

Correlation Coefficient

CITIC Guoan  GKHT Medical

Very poor diversification

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

Pair Corralation between CITIC Guoan and GKHT Medical

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 1.09 times more return on investment than GKHT Medical. However, CITIC Guoan is 1.09 times more volatile than GKHT Medical Technology. It trades about 0.22 of its potential returns per unit of risk. GKHT Medical Technology is currently generating about 0.13 per unit of risk. If you would invest  224.00  in CITIC Guoan Information on September 4, 2024 and sell it today you would earn a total of  140.00  from holding CITIC Guoan Information or generate 62.5% 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.  GKHT Medical Technology

CITIC Guoan Information

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 17 (%) 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.

GKHT Medical Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GKHT Medical Technology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, GKHT Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CITIC Guoan and GKHT Medical

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

The idea behind CITIC Guoan Information and GKHT Medical Technology 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.