Correlation Between Citigroup and Ruentex Engineering

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

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

Diversification Opportunities for Citigroup and Ruentex Engineering

0.65

Correlation Coefficient

Citigroup  Ruentex Engineering

Poor diversification

The 3 months correlation between Citigroup and Ruentex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ruentex Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Engineering 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 Ruentex Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Engineering has no effect on the direction of Citigroup i.e., Citigroup and Ruentex Engineering go up and down completely randomly.

Pair Corralation between Citigroup and Ruentex Engineering

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.67 times more return on investment than Ruentex Engineering. However, Citigroup is 1.49 times less risky than Ruentex Engineering. It trades about 0.08 of its potential returns per unit of risk. Ruentex Engineering Construction is currently generating about 0.04 per unit of risk. If you would invest  4,381  in Citigroup on December 3, 2024 and sell it today you would earn a total of  3,614  from holding Citigroup or generate 82.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.37%
Values	Daily Returns

Citigroup  vs.  Ruentex Engineering Constructi

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Ruentex Engineering

Risk-Adjusted Performance

Good

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

Pair Trading with Citigroup and Ruentex Engineering

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

The idea behind Citigroup and Ruentex Engineering 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.