Correlation Between Citigroup and Accton Technology

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

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

Diversification Opportunities for Citigroup and Accton Technology

0.87

Correlation Coefficient

Citigroup  Accton Technology

Very poor diversification

The 3 months correlation between Citigroup and Accton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Accton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accton Technology Corp 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 Accton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accton Technology Corp has no effect on the direction of Citigroup i.e., Citigroup and Accton Technology go up and down completely randomly.

Pair Corralation between Citigroup and Accton Technology

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.02 times less return on investment than Accton Technology. But when comparing it to its historical volatility, Citigroup is 1.65 times less risky than Accton Technology. It trades about 0.11 of its potential returns per unit of risk. Accton Technology Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  51,400  in Accton Technology Corp on September 13, 2024 and sell it today you would earn a total of  21,600  from holding Accton Technology Corp or generate 42.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.98%
Values	Daily Returns

Citigroup  vs.  Accton Technology Corp

Citigroup

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 15 (%) 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.

Accton Technology Corp

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Accton Technology Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Accton Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Accton Technology

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

The idea behind Citigroup and Accton Technology Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.