Correlation Between Industrial and CITIC Guoan

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

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

Diversification Opportunities for Industrial and CITIC Guoan

0.1

Correlation Coefficient

Industrial  CITIC Guoan

Average diversification

The 3 months correlation between Industrial and CITIC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and CITIC Guoan Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Guoan Information and Industrial 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 Industrial and Commercial 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 Information has no effect on the direction of Industrial i.e., Industrial and CITIC Guoan go up and down completely randomly.

Pair Corralation between Industrial and CITIC Guoan

Assuming the 90 days trading horizon Industrial and Commercial is expected to generate 0.29 times more return on investment than CITIC Guoan. However, Industrial and Commercial is 3.47 times less risky than CITIC Guoan. It trades about 0.3 of its potential returns per unit of risk. CITIC Guoan Information is currently generating about -0.02 per unit of risk. If you would invest  601.00  in Industrial and Commercial on September 30, 2024 and sell it today you would earn a total of  91.00  from holding Industrial and Commercial or generate 15.14% return on investment over 90 days.

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

Industrial and Commercial  vs.  CITIC Guoan Information

Industrial and Commercial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CITIC Guoan Information

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information 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.

Pair Trading with Industrial and CITIC Guoan

The main advantage of trading using opposite Industrial and CITIC Guoan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial 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 Industrial and Commercial and CITIC Guoan Information 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.