Correlation Between Huaibei Mining and Citic Guoan

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

By analyzing existing cross correlation between Huaibei Mining Holdings and Citic Guoan Wine, you can compare the effects of market volatilities on Huaibei Mining and Citic Guoan 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 Huaibei Mining with a short position of Citic Guoan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaibei Mining and Citic Guoan.

Diversification Opportunities for Huaibei Mining and Citic Guoan

-0.04

Correlation Coefficient

Huaibei Mining  Citic Guoan

Good diversification

The 3 months correlation between Huaibei and Citic is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Huaibei Mining Holdings and Citic Guoan Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Guoan Wine and Huaibei Mining 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 Huaibei Mining Holdings are associated (or correlated) with Citic Guoan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Guoan Wine has no effect on the direction of Huaibei Mining i.e., Huaibei Mining and Citic Guoan go up and down completely randomly.

Pair Corralation between Huaibei Mining and Citic Guoan

Assuming the 90 days trading horizon Huaibei Mining Holdings is expected to under-perform the Citic Guoan. But the stock apears to be less risky and, when comparing its historical volatility, Huaibei Mining Holdings is 1.23 times less risky than Citic Guoan. The stock trades about -0.05 of its potential returns per unit of risk. The Citic Guoan Wine is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  487.00  in Citic Guoan Wine on September 24, 2024 and sell it today you would earn a total of  111.00  from holding Citic Guoan Wine or generate 22.79% return on investment over 90 days.

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

Huaibei Mining Holdings  vs.  Citic Guoan Wine

Huaibei Mining Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaibei Mining Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Citic Guoan Wine

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Guoan Wine are ranked lower than 10 (%) 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.

Pair Trading with Huaibei Mining and Citic Guoan

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

The idea behind Huaibei Mining Holdings and Citic Guoan Wine 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.