Correlation Between Citigroup and China Water

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

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

Diversification Opportunities for Citigroup and China Water

-0.85

Correlation Coefficient

Citigroup  China Water

Pay attention - limited upside

The 3 months correlation between Citigroup and China is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Water Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Industry 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 Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Industry has no effect on the direction of Citigroup i.e., Citigroup and China Water go up and down completely randomly.

Pair Corralation between Citigroup and China Water

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.27 times more return on investment than China Water. However, Citigroup is 3.67 times less risky than China Water. It trades about 0.12 of its potential returns per unit of risk. China Water Industry is currently generating about -0.14 per unit of risk. If you would invest  6,083  in Citigroup on September 24, 2024 and sell it today you would earn a total of  894.00  from holding Citigroup or generate 14.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  China Water Industry

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.

China Water Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Water Industry 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 China Water

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

The idea behind Citigroup and China Water Industry 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.