Correlation Between Citic Guoan and Jiujiang Shanshui

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

Diversification Opportunities for Citic Guoan and Jiujiang Shanshui

0.94

Correlation Coefficient

Citic Guoan  Jiujiang Shanshui

Almost no diversification

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

Pair Corralation between Citic Guoan and Jiujiang Shanshui

Assuming the 90 days trading horizon Citic Guoan Wine is expected to generate 1.26 times more return on investment than Jiujiang Shanshui. However, Citic Guoan is 1.26 times more volatile than Jiujiang Shanshui Technology. It trades about 0.15 of its potential returns per unit of risk. Jiujiang Shanshui Technology is currently generating about 0.08 per unit of risk. If you would invest  568.00  in Citic Guoan Wine on September 5, 2024 and sell it today you would earn a total of  50.00  from holding Citic Guoan Wine or generate 8.8% 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.  Jiujiang Shanshui Technology

Citic Guoan Wine

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 12 (%) 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.

Jiujiang Shanshui

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jiujiang Shanshui Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiujiang Shanshui sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Jiujiang Shanshui

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

The idea behind Citic Guoan Wine and Jiujiang Shanshui 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.

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.