Correlation Between Citigroup and Xilinmen Furniture

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

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

Diversification Opportunities for Citigroup and Xilinmen Furniture

0.61

Correlation Coefficient

Citigroup  Xilinmen Furniture

Poor diversification

The 3 months correlation between Citigroup and Xilinmen is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Xilinmen Furniture Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilinmen Furniture 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 Xilinmen Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilinmen Furniture has no effect on the direction of Citigroup i.e., Citigroup and Xilinmen Furniture go up and down completely randomly.

Pair Corralation between Citigroup and Xilinmen Furniture

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.85 times more return on investment than Xilinmen Furniture. However, Citigroup is 1.18 times less risky than Xilinmen Furniture. It trades about 0.21 of its potential returns per unit of risk. Xilinmen Furniture Co is currently generating about -0.12 per unit of risk. If you would invest  6,393  in Citigroup on August 31, 2024 and sell it today you would earn a total of  623.00  from holding Citigroup or generate 9.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Xilinmen Furniture Co

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Xilinmen Furniture

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xilinmen Furniture Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xilinmen Furniture sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Xilinmen Furniture

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

The idea behind Citigroup and Xilinmen Furniture 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.