Correlation Between CITIC Guoan and DO Home

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Can any of the company-specific risk be diversified away by investing in both CITIC Guoan and DO Home 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 DO Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CITIC Guoan Information and DO Home Collection, you can compare the effects of market volatilities on CITIC Guoan and DO Home 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 DO Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITIC Guoan and DO Home.

Diversification Opportunities for CITIC Guoan and DO Home

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between CITIC and 002798 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection 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 Information are associated (or correlated) with DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and DO Home go up and down completely randomly.

Pair Corralation between CITIC Guoan and DO Home

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 0.61 times more return on investment than DO Home. However, CITIC Guoan Information is 1.64 times less risky than DO Home. It trades about -0.08 of its potential returns per unit of risk. DO Home Collection is currently generating about -0.16 per unit of risk. If you would invest  302.00  in CITIC Guoan Information on November 3, 2024 and sell it today you would lose (14.00) from holding CITIC Guoan Information or give up 4.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

CITIC Guoan Information  vs.  DO Home Collection

 Performance 
       Timeline  
CITIC Guoan Information 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CITIC Guoan Information has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
DO Home Collection 

Risk-Adjusted Performance

0 of 100

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

CITIC Guoan and DO Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CITIC Guoan and DO Home

The main advantage of trading using opposite CITIC Guoan and DO Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Guoan position performs unexpectedly, DO Home 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 DO Home will offset losses from the drop in DO Home's long position.
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The idea behind CITIC Guoan Information and DO Home Collection 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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