Correlation Between Citigroup and Sunny Optical

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

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

Diversification Opportunities for Citigroup and Sunny Optical

0.79

Correlation Coefficient

Citigroup  Sunny Optical

Poor diversification

The 3 months correlation between Citigroup and Sunny is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sunny Optical Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunny Optical Technology 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 Sunny Optical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunny Optical Technology has no effect on the direction of Citigroup i.e., Citigroup and Sunny Optical go up and down completely randomly.

Pair Corralation between Citigroup and Sunny Optical

Taking into account the 90-day investment horizon Citigroup is expected to generate 6.7 times less return on investment than Sunny Optical. But when comparing it to its historical volatility, Citigroup is 4.77 times less risky than Sunny Optical. It trades about 0.2 of its potential returns per unit of risk. Sunny Optical Technology is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  7,056  in Sunny Optical Technology on September 16, 2024 and sell it today you would earn a total of  1,613  from holding Sunny Optical Technology or generate 22.86% return on investment over 90 days.

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

Citigroup  vs.  Sunny Optical Technology

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Sunny Optical Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunny Optical Technology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Sunny Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Sunny Optical

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

The idea behind Citigroup and Sunny Optical Technology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.