Correlation Between Citigroup and Techshine Electronics

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

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

Diversification Opportunities for Citigroup and Techshine Electronics

0.69

Correlation Coefficient

Citigroup  Techshine Electronics

Poor diversification

The 3 months correlation between Citigroup and Techshine is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Techshine Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techshine Electronics 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 Techshine Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techshine Electronics has no effect on the direction of Citigroup i.e., Citigroup and Techshine Electronics go up and down completely randomly.

Pair Corralation between Citigroup and Techshine Electronics

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.42 times less return on investment than Techshine Electronics. But when comparing it to its historical volatility, Citigroup is 1.95 times less risky than Techshine Electronics. It trades about 0.2 of its potential returns per unit of risk. Techshine Electronics Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,559  in Techshine Electronics Co on September 12, 2024 and sell it today you would earn a total of  502.00  from holding Techshine Electronics Co or generate 32.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.63%
Values	Daily Returns

Citigroup  vs.  Techshine Electronics Co

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Techshine Electronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Techshine Electronics Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Techshine Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Techshine Electronics

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

The idea behind Citigroup and Techshine Electronics Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..