Correlation Between Citigroup and Beijing Venustech

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

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

Diversification Opportunities for Citigroup and Beijing Venustech

-0.25

Correlation Coefficient

Citigroup  Beijing Venustech

Very good diversification

The 3 months correlation between Citigroup and Beijing is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Beijing Venustech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Venustech 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 Beijing Venustech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Venustech has no effect on the direction of Citigroup i.e., Citigroup and Beijing Venustech go up and down completely randomly.

Pair Corralation between Citigroup and Beijing Venustech

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.2 times less return on investment than Beijing Venustech. But when comparing it to its historical volatility, Citigroup is 1.71 times less risky than Beijing Venustech. It trades about 0.01 of its potential returns per unit of risk. Beijing Venustech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,662  in Beijing Venustech on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Beijing Venustech or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Citigroup  vs.  Beijing Venustech

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Beijing Venustech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beijing Venustech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Beijing Venustech 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 Beijing Venustech

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

The idea behind Citigroup and Beijing Venustech 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.