Correlation Between Citigroup and Hangzhou Guotai

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

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

Diversification Opportunities for Citigroup and Hangzhou Guotai

0.52

Correlation Coefficient

Citigroup  Hangzhou Guotai

Very weak diversification

The 3 months correlation between Citigroup and Hangzhou is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hangzhou Guotai Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hangzhou Guotai Envi 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 Hangzhou Guotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hangzhou Guotai Envi has no effect on the direction of Citigroup i.e., Citigroup and Hangzhou Guotai go up and down completely randomly.

Pair Corralation between Citigroup and Hangzhou Guotai

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.48 times more return on investment than Hangzhou Guotai. However, Citigroup is 2.07 times less risky than Hangzhou Guotai. It trades about 0.07 of its potential returns per unit of risk. Hangzhou Guotai Environmental is currently generating about 0.0 per unit of risk. If you would invest  4,381  in Citigroup on September 28, 2024 and sell it today you would earn a total of  2,719  from holding Citigroup or generate 62.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.05%
Values	Daily Returns

Citigroup  vs.  Hangzhou Guotai Environmental

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Hangzhou Guotai Envi

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Hangzhou Guotai Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hangzhou Guotai 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 Hangzhou Guotai

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

The idea behind Citigroup and Hangzhou Guotai Environmental 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.