Correlation Between Citigroup and CTBC Emerging

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

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

Diversification Opportunities for Citigroup and CTBC Emerging

-0.07

Correlation Coefficient

Citigroup  CTBC Emerging

Good diversification

The 3 months correlation between Citigroup and CTBC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CTBC Emerging Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTBC Emerging Asia 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTBC Emerging Asia has no effect on the direction of Citigroup i.e., Citigroup and CTBC Emerging go up and down completely randomly.

Pair Corralation between Citigroup and CTBC Emerging

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.64 times more return on investment than CTBC Emerging. However, Citigroup is 3.64 times more volatile than CTBC Emerging Asia. It trades about 0.15 of its potential returns per unit of risk. CTBC Emerging Asia is currently generating about -0.13 per unit of risk. If you would invest  6,292  in Citigroup on October 10, 2024 and sell it today you would earn a total of  1,076  from holding Citigroup or generate 17.1% return on investment over 90 days.

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

Citigroup  vs.  CTBC Emerging Asia

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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 Emerging Asia

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Citigroup and CTBC Emerging Asia 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.