Correlation Between Citic Guoan and Ningbo Bird

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

Diversification Opportunities for Citic Guoan and Ningbo Bird

0.77

Correlation Coefficient

Citic Guoan  Ningbo Bird

Poor diversification

The 3 months correlation between Citic and Ningbo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Ningbo Bird Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ningbo Bird 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 Ningbo Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ningbo Bird has no effect on the direction of Citic Guoan i.e., Citic Guoan and Ningbo Bird go up and down completely randomly.

Pair Corralation between Citic Guoan and Ningbo Bird

Assuming the 90 days trading horizon Citic Guoan Wine is expected to under-perform the Ningbo Bird. But the stock apears to be less risky and, when comparing its historical volatility, Citic Guoan Wine is 1.58 times less risky than Ningbo Bird. The stock trades about -0.02 of its potential returns per unit of risk. The Ningbo Bird Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  427.00  in Ningbo Bird Co on September 28, 2024 and sell it today you would earn a total of  66.00  from holding Ningbo Bird Co or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Citic Guoan Wine  vs.  Ningbo Bird Co

Citic Guoan Wine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citic Guoan Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Citic Guoan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ningbo Bird

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ningbo Bird Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ningbo Bird sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citic Guoan and Ningbo Bird

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

The idea behind Citic Guoan Wine and Ningbo Bird Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.