Correlation Between Citigroup and Jiangsu Rongtai

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

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

Diversification Opportunities for Citigroup and Jiangsu Rongtai

0.76

Correlation Coefficient

Citigroup  Jiangsu Rongtai

Poor diversification

The 3 months correlation between Citigroup and Jiangsu is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Jiangsu Rongtai Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiangsu Rongtai Industry 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 Jiangsu Rongtai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiangsu Rongtai Industry has no effect on the direction of Citigroup i.e., Citigroup and Jiangsu Rongtai go up and down completely randomly.

Pair Corralation between Citigroup and Jiangsu Rongtai

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.49 times more return on investment than Jiangsu Rongtai. However, Citigroup is 2.05 times less risky than Jiangsu Rongtai. It trades about 0.09 of its potential returns per unit of risk. Jiangsu Rongtai Industry is currently generating about 0.01 per unit of risk. If you would invest  5,073  in Citigroup on October 8, 2024 and sell it today you would earn a total of  2,027  from holding Citigroup or generate 39.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.95%
Values	Daily Returns

Citigroup  vs.  Jiangsu Rongtai Industry

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.

Jiangsu Rongtai Industry

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Rongtai Industry are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Jiangsu Rongtai may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Jiangsu Rongtai

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

The idea behind Citigroup and Jiangsu Rongtai Industry 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.