Correlation Between Citigroup and Nanjing Red

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

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

Diversification Opportunities for Citigroup and Nanjing Red

0.64

Correlation Coefficient

Citigroup  Nanjing Red

Poor diversification

The 3 months correlation between Citigroup and Nanjing is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nanjing Red Sun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanjing Red Sun 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 Nanjing Red. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanjing Red Sun has no effect on the direction of Citigroup i.e., Citigroup and Nanjing Red go up and down completely randomly.

Pair Corralation between Citigroup and Nanjing Red

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.5 times more return on investment than Nanjing Red. However, Citigroup is 2.0 times less risky than Nanjing Red. It trades about 0.11 of its potential returns per unit of risk. Nanjing Red Sun is currently generating about 0.05 per unit of risk. If you would invest  4,346  in Citigroup on September 21, 2024 and sell it today you would earn a total of  2,496  from holding Citigroup or generate 57.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.91%
Values	Daily Returns

Citigroup  vs.  Nanjing Red Sun

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Nanjing Red Sun

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nanjing Red Sun are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanjing Red sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Nanjing Red

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

The idea behind Citigroup and Nanjing Red Sun 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.