Correlation Between Citigroup and China Union

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

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

Diversification Opportunities for Citigroup and China Union

0.76

Correlation Coefficient

Citigroup  China Union

Poor diversification

The 3 months correlation between Citigroup and China is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Union Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Union Holdings and Citigroup 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 Citigroup are associated (or correlated) with China Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Union Holdings has no effect on the direction of Citigroup i.e., Citigroup and China Union go up and down completely randomly.

Pair Corralation between Citigroup and China Union

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.72 times more return on investment than China Union. However, Citigroup is 1.39 times less risky than China Union. It trades about 0.07 of its potential returns per unit of risk. China Union Holdings is currently generating about 0.02 per unit of risk. If you would invest  4,219  in Citigroup on September 24, 2024 and sell it today you would earn a total of  2,700  from holding Citigroup or generate 64.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.18%
Values	Daily Returns

Citigroup  vs.  China Union Holdings

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

China Union Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China Union Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Union sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and China Union

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

The idea behind Citigroup and China Union Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.