Correlation Between Citic Guoan and Shaanxi Broadcast

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

Diversification Opportunities for Citic Guoan and Shaanxi Broadcast

0.95

Correlation Coefficient

Citic Guoan  Shaanxi Broadcast

Almost no diversification

The 3 months correlation between Citic and Shaanxi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citic Guoan Wine and Shaanxi Broadcast TV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Broadcast 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 Shaanxi Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Broadcast has no effect on the direction of Citic Guoan i.e., Citic Guoan and Shaanxi Broadcast go up and down completely randomly.

Pair Corralation between Citic Guoan and Shaanxi Broadcast

Assuming the 90 days trading horizon Citic Guoan is expected to generate 1.93 times less return on investment than Shaanxi Broadcast. In addition to that, Citic Guoan is 1.14 times more volatile than Shaanxi Broadcast TV. It trades about 0.08 of its total potential returns per unit of risk. Shaanxi Broadcast TV is currently generating about 0.17 per unit of volatility. If you would invest  217.00  in Shaanxi Broadcast TV on September 25, 2024 and sell it today you would earn a total of  63.00  from holding Shaanxi Broadcast TV or generate 29.03% 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.  Shaanxi Broadcast TV

Citic Guoan Wine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 5 (%) 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.

Shaanxi Broadcast

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Citic Guoan and Shaanxi Broadcast

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

The idea behind Citic Guoan Wine and Shaanxi Broadcast TV 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.