Correlation Between Citigroup and China Great

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

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

Diversification Opportunities for Citigroup and China Great

0.35

Correlation Coefficient

Citigroup  China Great

Weak diversification

The 3 months correlation between Citigroup and China is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Great Wall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Great Wall 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 Great. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Great Wall has no effect on the direction of Citigroup i.e., Citigroup and China Great go up and down completely randomly.

Pair Corralation between Citigroup and China Great

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than China Great. However, Citigroup is 1.63 times less risky than China Great. It trades about 0.14 of its potential returns per unit of risk. China Great Wall is currently generating about 0.02 per unit of risk. If you would invest  6,133  in Citigroup on September 27, 2024 and sell it today you would earn a total of  1,002  from holding Citigroup or generate 16.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

Citigroup  vs.  China Great Wall

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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 Great Wall

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Great Wall are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Great is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and China Great

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

The idea behind Citigroup and China Great Wall 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.