Correlation Between CITIC Guoan and State Grid

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

Diversification Opportunities for CITIC Guoan and State Grid

0.94

Correlation Coefficient

CITIC Guoan  State Grid

Almost no diversification

The 3 months correlation between CITIC and State is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and State Grid InformationCommunic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Grid Informati 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 State Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Grid Informati has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and State Grid go up and down completely randomly.

Pair Corralation between CITIC Guoan and State Grid

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 1.29 times more return on investment than State Grid. However, CITIC Guoan is 1.29 times more volatile than State Grid InformationCommunication. It trades about 0.21 of its potential returns per unit of risk. State Grid InformationCommunication is currently generating about 0.17 per unit of risk. If you would invest  219.00  in CITIC Guoan Information on September 2, 2024 and sell it today you would earn a total of  132.00  from holding CITIC Guoan Information or generate 60.27% return on investment over 90 days.

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

CITIC Guoan Information  vs.  State Grid InformationCommunic

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.

State Grid Informati

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with CITIC Guoan and State Grid

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

The idea behind CITIC Guoan Information and State Grid InformationCommunication 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.