Correlation Between Citigroup and Guotai Junan

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

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

Diversification Opportunities for Citigroup and Guotai Junan

0.53

Correlation Coefficient

Citigroup  Guotai Junan

Very weak diversification

The 3 months correlation between Citigroup and Guotai is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Guotai Junan Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Junan Securities 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 Guotai Junan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Junan Securities has no effect on the direction of Citigroup i.e., Citigroup and Guotai Junan go up and down completely randomly.

Pair Corralation between Citigroup and Guotai Junan

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.99 times less return on investment than Guotai Junan. But when comparing it to its historical volatility, Citigroup is 1.48 times less risky than Guotai Junan. It trades about 0.12 of its potential returns per unit of risk. Guotai Junan Securities is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,470  in Guotai Junan Securities on September 30, 2024 and sell it today you would earn a total of  425.00  from holding Guotai Junan Securities or generate 28.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Citigroup  vs.  Guotai Junan Securities

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.

Guotai Junan Securities

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guotai Junan Securities are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guotai Junan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Guotai Junan

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

The idea behind Citigroup and Guotai Junan Securities 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 CEOs Directory module to screen CEOs from public companies around the world.