Correlation Between Citigroup and Jeju Beer

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

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

Diversification Opportunities for Citigroup and Jeju Beer

-0.16

Correlation Coefficient

Citigroup  Jeju Beer

Good diversification

The 3 months correlation between Citigroup and Jeju is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Jeju Beer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeju Beer 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 Jeju Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeju Beer has no effect on the direction of Citigroup i.e., Citigroup and Jeju Beer go up and down completely randomly.

Pair Corralation between Citigroup and Jeju Beer

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.46 times more return on investment than Jeju Beer. However, Citigroup is 2.18 times less risky than Jeju Beer. It trades about 0.13 of its potential returns per unit of risk. Jeju Beer Co is currently generating about 0.04 per unit of risk. If you would invest  6,092  in Citigroup on September 3, 2024 and sell it today you would earn a total of  995.00  from holding Citigroup or generate 16.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Citigroup  vs.  Jeju Beer Co

Citigroup

Risk-Adjusted Performance

10 of 100

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.

Jeju Beer

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jeju Beer Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jeju Beer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Jeju Beer

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

The idea behind Citigroup and Jeju Beer Co 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.