Correlation Between Citigroup and Guangzhou Zhujiang

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

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

Diversification Opportunities for Citigroup and Guangzhou Zhujiang

0.35

Correlation Coefficient

Citigroup  Guangzhou Zhujiang

Weak diversification

The 3 months correlation between Citigroup and Guangzhou is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Guangzhou Zhujiang Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Zhujiang 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 Guangzhou Zhujiang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Zhujiang has no effect on the direction of Citigroup i.e., Citigroup and Guangzhou Zhujiang go up and down completely randomly.

Pair Corralation between Citigroup and Guangzhou Zhujiang

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.85 times more return on investment than Guangzhou Zhujiang. However, Citigroup is 1.17 times less risky than Guangzhou Zhujiang. It trades about 0.12 of its potential returns per unit of risk. Guangzhou Zhujiang Brewery is currently generating about 0.05 per unit of risk. If you would invest  6,092  in Citigroup on August 31, 2024 and sell it today you would earn a total of  924.00  from holding Citigroup or generate 15.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Citigroup  vs.  Guangzhou Zhujiang Brewery

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Guangzhou Zhujiang

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Zhujiang Brewery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangzhou Zhujiang may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Citigroup and Guangzhou Zhujiang

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

The idea behind Citigroup and Guangzhou Zhujiang Brewery 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.