Correlation Between Citigroup and Taiwan Speciality

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

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

Diversification Opportunities for Citigroup and Taiwan Speciality

-0.52

Correlation Coefficient

Citigroup  Taiwan Speciality

Excellent diversification

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

Pair Corralation between Citigroup and Taiwan Speciality

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.72 times more return on investment than Taiwan Speciality. However, Citigroup is 1.39 times less risky than Taiwan Speciality. It trades about 0.09 of its potential returns per unit of risk. Taiwan Speciality Chemicals is currently generating about -0.01 per unit of risk. If you would invest  5,896  in Citigroup on September 14, 2024 and sell it today you would earn a total of  1,205  from holding Citigroup or generate 20.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Citigroup  vs.  Taiwan Speciality Chemicals

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Taiwan Speciality

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Speciality Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Speciality is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Taiwan Speciality

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

The idea behind Citigroup and Taiwan Speciality Chemicals 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.