Correlation Between Citigroup and Cathay TIP

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

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

Diversification Opportunities for Citigroup and Cathay TIP

-0.88

Correlation Coefficient

Citigroup  Cathay TIP

Pay attention - limited upside

The 3 months correlation between Citigroup and Cathay is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cathay TIP TAIEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay TIP TAIEX 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 Cathay TIP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay TIP TAIEX has no effect on the direction of Citigroup i.e., Citigroup and Cathay TIP go up and down completely randomly.

Pair Corralation between Citigroup and Cathay TIP

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Cathay TIP. In addition to that, Citigroup is 6.0 times more volatile than Cathay TIP TAIEX. It trades about -0.2 of its total potential returns per unit of risk. Cathay TIP TAIEX is currently generating about 0.52 per unit of volatility. If you would invest  2,719  in Cathay TIP TAIEX on December 4, 2024 and sell it today you would earn a total of  108.00  from holding Cathay TIP TAIEX or generate 3.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Citigroup  vs.  Cathay TIP TAIEX

Citigroup

Risk-Adjusted Performance

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 April 2025.

Cathay TIP TAIEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cathay TIP TAIEX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cathay TIP is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Cathay TIP

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

The idea behind Citigroup and Cathay TIP TAIEX 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.