Correlation Between Citigroup and Huaxia Eye

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

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

Diversification Opportunities for Citigroup and Huaxia Eye

0.37

Correlation Coefficient

Citigroup  Huaxia Eye

Weak diversification

The 3 months correlation between Citigroup and Huaxia is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Huaxia Eye Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaxia Eye Hospital 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 Huaxia Eye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaxia Eye Hospital has no effect on the direction of Citigroup i.e., Citigroup and Huaxia Eye go up and down completely randomly.

Pair Corralation between Citigroup and Huaxia Eye

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.62 times more return on investment than Huaxia Eye. However, Citigroup is 1.62 times less risky than Huaxia Eye. It trades about 0.02 of its potential returns per unit of risk. Huaxia Eye Hospital is currently generating about -0.04 per unit of risk. If you would invest  7,075  in Citigroup on September 25, 2024 and sell it today you would earn a total of  25.00  from holding Citigroup or generate 0.35% 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.  Huaxia Eye Hospital

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.

Huaxia Eye Hospital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Huaxia Eye Hospital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Huaxia Eye sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Huaxia Eye

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

The idea behind Citigroup and Huaxia Eye Hospital 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.