Correlation Between Citigroup and Change Financial

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

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

Diversification Opportunities for Citigroup and Change Financial

-0.84

Correlation Coefficient

Citigroup  Change Financial

Pay attention - limited upside

The 3 months correlation between Citigroup and Change is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Change Financial Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Change Financial 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 Change Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Change Financial has no effect on the direction of Citigroup i.e., Citigroup and Change Financial go up and down completely randomly.

Pair Corralation between Citigroup and Change Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.6 times less return on investment than Change Financial. But when comparing it to its historical volatility, Citigroup is 3.31 times less risky than Change Financial. It trades about 0.07 of its potential returns per unit of risk. Change Financial Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Change Financial Limited on September 24, 2024 and sell it today you would earn a total of  1.00  from holding Change Financial Limited or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Citigroup  vs.  Change Financial Limited

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.

Change Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Change Financial Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Citigroup and Change Financial

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

The idea behind Citigroup and Change Financial Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.