Correlation Between Kweichow Moutai and CITIC Securities

Can any of the company-specific risk be diversified away by investing in both Kweichow Moutai and CITIC Securities 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 Kweichow Moutai and CITIC Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kweichow Moutai Co and CITIC Securities Co, you can compare the effects of market volatilities on Kweichow Moutai and CITIC Securities 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 Kweichow Moutai with a short position of CITIC Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kweichow Moutai and CITIC Securities.

Diversification Opportunities for Kweichow Moutai and CITIC Securities

0.73

Correlation Coefficient

Kweichow Moutai  CITIC Securities

Poor diversification

The 3 months correlation between Kweichow and CITIC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Kweichow Moutai Co and CITIC Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Securities and Kweichow Moutai 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 Kweichow Moutai Co are associated (or correlated) with CITIC Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Securities has no effect on the direction of Kweichow Moutai i.e., Kweichow Moutai and CITIC Securities go up and down completely randomly.

Pair Corralation between Kweichow Moutai and CITIC Securities

Assuming the 90 days trading horizon Kweichow Moutai Co is expected to generate 0.77 times more return on investment than CITIC Securities. However, Kweichow Moutai Co is 1.3 times less risky than CITIC Securities. It trades about 0.08 of its potential returns per unit of risk. CITIC Securities Co is currently generating about 0.03 per unit of risk. If you would invest  149,857  in Kweichow Moutai Co on September 25, 2024 and sell it today you would earn a total of  2,788  from holding Kweichow Moutai Co or generate 1.86% return on investment over 90 days.

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

Kweichow Moutai Co  vs.  CITIC Securities Co

Kweichow Moutai

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kweichow Moutai Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kweichow Moutai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CITIC Securities

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Securities Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CITIC Securities sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kweichow Moutai and CITIC Securities

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

The idea behind Kweichow Moutai Co and CITIC Securities 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.