Correlation Between Citigroup and China Marine

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

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

Diversification Opportunities for Citigroup and China Marine

0.22

Correlation Coefficient

Citigroup  China Marine

Modest diversification

The 3 months correlation between Citigroup and China is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Marine Information in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Marine Information 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 China Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Marine Information has no effect on the direction of Citigroup i.e., Citigroup and China Marine go up and down completely randomly.

Pair Corralation between Citigroup and China Marine

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than China Marine. However, Citigroup is 1.65 times less risky than China Marine. It trades about 0.07 of its potential returns per unit of risk. China Marine Information is currently generating about 0.03 per unit of risk. If you would invest  4,308  in Citigroup on September 26, 2024 and sell it today you would earn a total of  2,792  from holding Citigroup or generate 64.81% return on investment over 90 days.

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

Citigroup  vs.  China Marine Information

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 uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

China Marine Information

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Marine Information are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Marine sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and China Marine

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

The idea behind Citigroup and China Marine Information 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.