Correlation Between Huadi International and CITGO

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

By analyzing existing cross correlation between Huadi International Group and CITGO Petroleum 7, you can compare the effects of market volatilities on Huadi International and CITGO 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 Huadi International with a short position of CITGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huadi International and CITGO.

Diversification Opportunities for Huadi International and CITGO

-0.04

Correlation Coefficient

Huadi International  CITGO

Good diversification

The 3 months correlation between Huadi and CITGO is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Huadi International Group and CITGO Petroleum 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITGO Petroleum 7 and Huadi International 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 Huadi International Group are associated (or correlated) with CITGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITGO Petroleum 7 has no effect on the direction of Huadi International i.e., Huadi International and CITGO go up and down completely randomly.

Pair Corralation between Huadi International and CITGO

Given the investment horizon of 90 days Huadi International Group is expected to under-perform the CITGO. In addition to that, Huadi International is 19.45 times more volatile than CITGO Petroleum 7. It trades about -0.2 of its total potential returns per unit of risk. CITGO Petroleum 7 is currently generating about -0.01 per unit of volatility. If you would invest  10,000  in CITGO Petroleum 7 on September 30, 2024 and sell it today you would lose (7.00) from holding CITGO Petroleum 7 or give up 0.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.75%
Values	Daily Returns

Huadi International Group  vs.  CITGO Petroleum 7

Huadi International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huadi International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

CITGO Petroleum 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITGO Petroleum 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITGO is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huadi International and CITGO

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

The idea behind Huadi International Group and CITGO Petroleum 7 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.