Correlation Between Citigroup and Cathay Real

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

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

Diversification Opportunities for Citigroup and Cathay Real

-0.08

Correlation Coefficient

Citigroup  Cathay Real

Good diversification

The 3 months correlation between Citigroup and Cathay is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cathay Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Real Estate 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 Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Real Estate has no effect on the direction of Citigroup i.e., Citigroup and Cathay Real go up and down completely randomly.

Pair Corralation between Citigroup and Cathay Real

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.46 times more return on investment than Cathay Real. However, Citigroup is 2.16 times less risky than Cathay Real. It trades about 0.2 of its potential returns per unit of risk. Cathay Real Estate is currently generating about -0.02 per unit of risk. If you would invest  6,876  in Citigroup on September 16, 2024 and sell it today you would earn a total of  225.00  from holding Citigroup or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Cathay Real Estate

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Cathay Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Cathay Real is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Cathay Real

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

The idea behind Citigroup and Cathay Real Estate 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.