Correlation Between Citigroup and Excellence Optoelectronic

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

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

Diversification Opportunities for Citigroup and Excellence Optoelectronic

-0.37

Correlation Coefficient

Citigroup  Excellence Optoelectronic

Very good diversification

The 3 months correlation between Citigroup and Excellence is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Excellence Optoelectronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excellence Optoelectronic 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 Excellence Optoelectronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excellence Optoelectronic has no effect on the direction of Citigroup i.e., Citigroup and Excellence Optoelectronic go up and down completely randomly.

Pair Corralation between Citigroup and Excellence Optoelectronic

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.15 times more return on investment than Excellence Optoelectronic. However, Citigroup is 1.15 times more volatile than Excellence Optoelectronic. It trades about 0.02 of its potential returns per unit of risk. Excellence Optoelectronic is currently generating about -0.11 per unit of risk. If you would invest  7,173  in Citigroup on December 5, 2024 and sell it today you would earn a total of  62.00  from holding Citigroup or generate 0.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

Citigroup  vs.  Excellence Optoelectronic

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Excellence Optoelectronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Excellence Optoelectronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Citigroup and Excellence Optoelectronic

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

The idea behind Citigroup and Excellence Optoelectronic 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.