Correlation Between Citigroup and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Citigroup and Tencent Holdings 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 Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Tencent Holdings Ltd, you can compare the effects of market volatilities on Citigroup and Tencent Holdings 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 Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Tencent Holdings.
Diversification Opportunities for Citigroup and Tencent Holdings
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Citigroup and Tencent is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Tencent Holdings Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings 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 Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of Citigroup i.e., Citigroup and Tencent Holdings go up and down completely randomly.
Pair Corralation between Citigroup and Tencent Holdings
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.8 times more return on investment than Tencent Holdings. However, Citigroup is 1.26 times less risky than Tencent Holdings. It trades about 0.14 of its potential returns per unit of risk. Tencent Holdings Ltd is currently generating about 0.05 per unit of risk. If you would invest 6,255 in Citigroup on September 23, 2024 and sell it today you would earn a total of 664.00 from holding Citigroup or generate 10.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 97.73% |
Values | Daily Returns |
Citigroup vs. Tencent Holdings Ltd
Performance |
Timeline |
Citigroup |
Tencent Holdings |
Citigroup and Tencent Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and Tencent Holdings
The main advantage of trading using opposite Citigroup and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Tencent Holdings 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 Tencent Holdings will offset losses from the drop in Tencent Holdings' long position.Citigroup vs. Nu Holdings | Citigroup vs. Canadian Imperial Bank | Citigroup vs. Bank of Montreal | Citigroup vs. Bank of Nova |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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