Correlation Between CITIC Guoan and Datang HuaYin

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

Diversification Opportunities for CITIC Guoan and Datang HuaYin

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between CITIC and Datang is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Guoan Information and Datang HuaYin Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang HuaYin Electric 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 Datang HuaYin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang HuaYin Electric has no effect on the direction of CITIC Guoan i.e., CITIC Guoan and Datang HuaYin go up and down completely randomly.

Pair Corralation between CITIC Guoan and Datang HuaYin

Assuming the 90 days trading horizon CITIC Guoan Information is expected to generate 0.97 times more return on investment than Datang HuaYin. However, CITIC Guoan Information is 1.03 times less risky than Datang HuaYin. It trades about 0.04 of its potential returns per unit of risk. Datang HuaYin Electric is currently generating about -0.01 per unit of risk. If you would invest  259.00  in CITIC Guoan Information on September 3, 2024 and sell it today you would earn a total of  92.00  from holding CITIC Guoan Information or generate 35.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

CITIC Guoan Information  vs.  Datang HuaYin Electric

 Performance 
       Timeline  
CITIC Guoan Information 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Guoan Information are ranked lower than 14 (%) 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.
Datang HuaYin Electric 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Datang HuaYin Electric are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Datang HuaYin sustained solid returns over the last few months and may actually be approaching a breakup point.

CITIC Guoan and Datang HuaYin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CITIC Guoan and Datang HuaYin

The main advantage of trading using opposite CITIC Guoan and Datang HuaYin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC Guoan position performs unexpectedly, Datang HuaYin 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 Datang HuaYin will offset losses from the drop in Datang HuaYin's long position.
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The idea behind CITIC Guoan Information and Datang HuaYin Electric 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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