Correlation Between Citigroup and Shanxi Tond

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

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

Diversification Opportunities for Citigroup and Shanxi Tond

0.76

Correlation Coefficient

Citigroup  Shanxi Tond

Poor diversification

The 3 months correlation between Citigroup and Shanxi is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shanxi Tond Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanxi Tond Chemical 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 Shanxi Tond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanxi Tond Chemical has no effect on the direction of Citigroup i.e., Citigroup and Shanxi Tond go up and down completely randomly.

Pair Corralation between Citigroup and Shanxi Tond

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.78 times more return on investment than Shanxi Tond. However, Citigroup is 1.29 times less risky than Shanxi Tond. It trades about 0.06 of its potential returns per unit of risk. Shanxi Tond Chemical is currently generating about 0.02 per unit of risk. If you would invest  6,227  in Citigroup on September 29, 2024 and sell it today you would earn a total of  873.00  from holding Citigroup or generate 14.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Citigroup  vs.  Shanxi Tond Chemical

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.

Shanxi Tond Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Citigroup and Shanxi Tond

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

The idea behind Citigroup and Shanxi Tond Chemical 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 Global Correlations module to find global opportunities by holding instruments from different markets.