Correlation Between Citigroup and MITSUBISHI STEEL

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

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

Diversification Opportunities for Citigroup and MITSUBISHI STEEL

0.18

Correlation Coefficient

Citigroup  MITSUBISHI STEEL

Average diversification

The 3 months correlation between Citigroup and MITSUBISHI is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and MITSUBISHI STEEL MFG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MITSUBISHI STEEL MFG 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 MITSUBISHI STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MITSUBISHI STEEL MFG has no effect on the direction of Citigroup i.e., Citigroup and MITSUBISHI STEEL go up and down completely randomly.

Pair Corralation between Citigroup and MITSUBISHI STEEL

Taking into account the 90-day investment horizon Citigroup is expected to generate 7.58 times less return on investment than MITSUBISHI STEEL. In addition to that, Citigroup is 1.26 times more volatile than MITSUBISHI STEEL MFG. It trades about 0.01 of its total potential returns per unit of risk. MITSUBISHI STEEL MFG is currently generating about 0.14 per unit of volatility. If you would invest  909.00  in MITSUBISHI STEEL MFG on December 30, 2024 and sell it today you would earn a total of  131.00  from holding MITSUBISHI STEEL MFG or generate 14.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Citigroup  vs.  MITSUBISHI STEEL MFG

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.

MITSUBISHI STEEL MFG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MITSUBISHI STEEL MFG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, MITSUBISHI STEEL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and MITSUBISHI STEEL

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

The idea behind Citigroup and MITSUBISHI STEEL MFG 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.