Correlation Between Citic Guoan and Vanfund Urban

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

By analyzing existing cross correlation between Citic Guoan Wine and Vanfund Urban Investment, you can compare the effects of market volatilities on Citic Guoan and Vanfund Urban 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 Vanfund Urban. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic Guoan and Vanfund Urban.

Diversification Opportunities for Citic Guoan and Vanfund Urban

0.92

Correlation Coefficient

Citic Guoan  Vanfund Urban

Almost no diversification

The 3 months correlation between Citic and Vanfund is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Vanfund Urban Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanfund Urban Investment 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 Wine are associated (or correlated) with Vanfund Urban. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanfund Urban Investment has no effect on the direction of Citic Guoan i.e., Citic Guoan and Vanfund Urban go up and down completely randomly.

Pair Corralation between Citic Guoan and Vanfund Urban

Assuming the 90 days trading horizon Citic Guoan is expected to generate 2.65 times less return on investment than Vanfund Urban. But when comparing it to its historical volatility, Citic Guoan Wine is 1.26 times less risky than Vanfund Urban. It trades about 0.05 of its potential returns per unit of risk. Vanfund Urban Investment is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  411.00  in Vanfund Urban Investment on September 26, 2024 and sell it today you would earn a total of  82.00  from holding Vanfund Urban Investment or generate 19.95% 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 Wine  vs.  Vanfund Urban Investment

Citic Guoan Wine

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Citic Guoan may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanfund Urban Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanfund Urban Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vanfund Urban sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Vanfund Urban

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

The idea behind Citic Guoan Wine and Vanfund Urban Investment 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.