Correlation Between Citigroup and Heilongjiang Transport

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

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

Diversification Opportunities for Citigroup and Heilongjiang Transport

0.81

Correlation Coefficient

Citigroup  Heilongjiang Transport

Very poor diversification

The 3 months correlation between Citigroup and Heilongjiang is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Heilongjiang Transport Develop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heilongjiang Transport 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 Heilongjiang Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heilongjiang Transport has no effect on the direction of Citigroup i.e., Citigroup and Heilongjiang Transport go up and down completely randomly.

Pair Corralation between Citigroup and Heilongjiang Transport

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.79 times less return on investment than Heilongjiang Transport. But when comparing it to its historical volatility, Citigroup is 1.32 times less risky than Heilongjiang Transport. It trades about 0.13 of its potential returns per unit of risk. Heilongjiang Transport Development is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  303.00  in Heilongjiang Transport Development on September 2, 2024 and sell it today you would earn a total of  86.00  from holding Heilongjiang Transport Development or generate 28.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.19%
Values	Daily Returns

Citigroup  vs.  Heilongjiang Transport Develop

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.

Heilongjiang Transport

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Citigroup and Heilongjiang Transport

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

The idea behind Citigroup and Heilongjiang Transport Development 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.