Correlation Between Citigroup and AIA Group

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

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

Diversification Opportunities for Citigroup and AIA Group

-0.26

Correlation Coefficient

Citigroup  AIA Group

Very good diversification

The 3 months correlation between Citigroup and AIA is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and AIA Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIA Group 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 AIA Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIA Group has no effect on the direction of Citigroup i.e., Citigroup and AIA Group go up and down completely randomly.

Pair Corralation between Citigroup and AIA Group

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.7 times more return on investment than AIA Group. However, Citigroup is 1.42 times less risky than AIA Group. It trades about 0.19 of its potential returns per unit of risk. AIA Group Ltd is currently generating about 0.04 per unit of risk. If you would invest  5,716  in Citigroup on September 13, 2024 and sell it today you would earn a total of  1,427  from holding Citigroup or generate 24.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  AIA Group Ltd

Citigroup

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

AIA Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AIA Group Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, AIA Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and AIA Group

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

The idea behind Citigroup and AIA Group Ltd 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..