Correlation Between Citigroup and Zhejiang Longsheng

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

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

Diversification Opportunities for Citigroup and Zhejiang Longsheng

0.68

Correlation Coefficient

Citigroup  Zhejiang Longsheng

Poor diversification

The 3 months correlation between Citigroup and Zhejiang is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Zhejiang Longsheng Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Longsheng 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 Zhejiang Longsheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Longsheng has no effect on the direction of Citigroup i.e., Citigroup and Zhejiang Longsheng go up and down completely randomly.

Pair Corralation between Citigroup and Zhejiang Longsheng

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.21 times more return on investment than Zhejiang Longsheng. However, Citigroup is 1.21 times more volatile than Zhejiang Longsheng Group. It trades about 0.07 of its potential returns per unit of risk. Zhejiang Longsheng Group is currently generating about 0.02 per unit of risk. If you would invest  4,168  in Citigroup on September 20, 2024 and sell it today you would earn a total of  2,734  from holding Citigroup or generate 65.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.17%
Values	Daily Returns

Citigroup  vs.  Zhejiang Longsheng Group

Citigroup

Risk-Adjusted Performance

10 of 100

OK

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.

Zhejiang Longsheng

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Longsheng Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Longsheng sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Zhejiang Longsheng

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

The idea behind Citigroup and Zhejiang Longsheng Group 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.