Correlation Between Citigroup and Shanghai Putailai

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

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

Diversification Opportunities for Citigroup and Shanghai Putailai

0.8

Correlation Coefficient

Citigroup  Shanghai Putailai

Very poor diversification

The 3 months correlation between Citigroup and Shanghai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shanghai Putailai New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Putailai New 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 Shanghai Putailai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Putailai New has no effect on the direction of Citigroup i.e., Citigroup and Shanghai Putailai go up and down completely randomly.

Pair Corralation between Citigroup and Shanghai Putailai

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.49 times less return on investment than Shanghai Putailai. But when comparing it to its historical volatility, Citigroup is 2.46 times less risky than Shanghai Putailai. It trades about 0.12 of its potential returns per unit of risk. Shanghai Putailai New is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,158  in Shanghai Putailai New on September 24, 2024 and sell it today you would earn a total of  562.00  from holding Shanghai Putailai New or generate 48.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.75%
Values	Daily Returns

Citigroup  vs.  Shanghai Putailai New

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.

Shanghai Putailai New

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Citigroup and Shanghai Putailai

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

The idea behind Citigroup and Shanghai Putailai New 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.