Correlation Between Citigroup and CTBC Treasury

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

By analyzing existing cross correlation between Citigroup and CTBC Treasury 20, you can compare the effects of market volatilities on Citigroup and CTBC Treasury 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 CTBC Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and CTBC Treasury.

Diversification Opportunities for Citigroup and CTBC Treasury

-0.19

Correlation Coefficient

Citigroup  CTBC Treasury

Good diversification

The 3 months correlation between Citigroup and CTBC is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CTBC Treasury 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Treasury 20 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 CTBC Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Treasury 20 has no effect on the direction of Citigroup i.e., Citigroup and CTBC Treasury go up and down completely randomly.

Pair Corralation between Citigroup and CTBC Treasury

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.28 times more return on investment than CTBC Treasury. However, Citigroup is 2.28 times more volatile than CTBC Treasury 20. It trades about 0.24 of its potential returns per unit of risk. CTBC Treasury 20 is currently generating about -0.07 per unit of risk. If you would invest  7,075  in Citigroup on October 25, 2024 and sell it today you would earn a total of  1,094  from holding Citigroup or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Citigroup  vs.  CTBC Treasury 20

Citigroup

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 21 (%) 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.

CTBC Treasury 20

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CTBC Treasury 20 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CTBC Treasury 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 CTBC Treasury

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

The idea behind Citigroup and CTBC Treasury 20 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.