Correlation Between Citigroup and Huizhou Speed

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

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

Diversification Opportunities for Citigroup and Huizhou Speed

-0.18

Correlation Coefficient

Citigroup  Huizhou Speed

Good diversification

The 3 months correlation between Citigroup and Huizhou is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Huizhou Speed Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huizhou Speed Wireless 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 Huizhou Speed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huizhou Speed Wireless has no effect on the direction of Citigroup i.e., Citigroup and Huizhou Speed go up and down completely randomly.

Pair Corralation between Citigroup and Huizhou Speed

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.1 times less return on investment than Huizhou Speed. But when comparing it to its historical volatility, Citigroup is 2.97 times less risky than Huizhou Speed. It trades about 0.06 of its potential returns per unit of risk. Huizhou Speed Wireless is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  788.00  in Huizhou Speed Wireless on October 15, 2024 and sell it today you would earn a total of  412.00  from holding Huizhou Speed Wireless or generate 52.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.57%
Values	Daily Returns

Citigroup  vs.  Huizhou Speed Wireless

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Huizhou Speed Wireless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huizhou Speed Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Huizhou Speed is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Huizhou Speed

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

The idea behind Citigroup and Huizhou Speed Wireless 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.