Correlation Between Citigroup and Lepu Medical

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

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

Diversification Opportunities for Citigroup and Lepu Medical

0.38

Correlation Coefficient

Citigroup  Lepu Medical

Weak diversification

The 3 months correlation between Citigroup and Lepu is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Lepu Medical Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepu Medical Tech 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 Lepu Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepu Medical Tech has no effect on the direction of Citigroup i.e., Citigroup and Lepu Medical go up and down completely randomly.

Pair Corralation between Citigroup and Lepu Medical

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Lepu Medical. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.13 times less risky than Lepu Medical. The stock trades about -0.03 of its potential returns per unit of risk. The Lepu Medical Tech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,189  in Lepu Medical Tech on September 23, 2024 and sell it today you would earn a total of  14.00  from holding Lepu Medical Tech or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Lepu Medical Tech

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Lepu Medical Tech

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lepu Medical Tech are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lepu Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Lepu Medical

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

The idea behind Citigroup and Lepu Medical Tech 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.