Correlation Between Citigroup and New Asia

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

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

Diversification Opportunities for Citigroup and New Asia

0.79

Correlation Coefficient

Citigroup  New Asia

Poor diversification

The 3 months correlation between Citigroup and New is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction 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 New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of Citigroup i.e., Citigroup and New Asia go up and down completely randomly.

Pair Corralation between Citigroup and New Asia

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.58 times less return on investment than New Asia. But when comparing it to its historical volatility, Citigroup is 2.47 times less risky than New Asia. It trades about 0.4 of its potential returns per unit of risk. New Asia Construction is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  1,240  in New Asia Construction on October 22, 2024 and sell it today you would earn a total of  535.00  from holding New Asia Construction or generate 43.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  New Asia Construction

Citigroup

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 17 (%) 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.

New Asia Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Asia Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, New Asia showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and New Asia

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

The idea behind Citigroup and New Asia Construction 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.