Correlation Between Citigroup and Suzhou TFC

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

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

Diversification Opportunities for Citigroup and Suzhou TFC

0.29

Correlation Coefficient

Citigroup  Suzhou TFC

Modest diversification

The 3 months correlation between Citigroup and Suzhou is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Suzhou TFC Optical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzhou TFC Optical 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 Suzhou TFC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzhou TFC Optical has no effect on the direction of Citigroup i.e., Citigroup and Suzhou TFC go up and down completely randomly.

Pair Corralation between Citigroup and Suzhou TFC

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.63 times less return on investment than Suzhou TFC. But when comparing it to its historical volatility, Citigroup is 3.01 times less risky than Suzhou TFC. It trades about 0.14 of its potential returns per unit of risk. Suzhou TFC Optical is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,302  in Suzhou TFC Optical on September 20, 2024 and sell it today you would earn a total of  2,529  from holding Suzhou TFC Optical or generate 34.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.65%
Values	Daily Returns

Citigroup  vs.  Suzhou TFC Optical

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

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.

Suzhou TFC Optical

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Citigroup and Suzhou TFC

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

The idea behind Citigroup and Suzhou TFC Optical 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.