Correlation Between Citigroup and Chunghwa Precision

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

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

Diversification Opportunities for Citigroup and Chunghwa Precision

-0.11

Correlation Coefficient

Citigroup  Chunghwa Precision

Good diversification

The 3 months correlation between Citigroup and Chunghwa is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Chunghwa Precision Test in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Precision Test 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 Chunghwa Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Precision Test has no effect on the direction of Citigroup i.e., Citigroup and Chunghwa Precision go up and down completely randomly.

Pair Corralation between Citigroup and Chunghwa Precision

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Chunghwa Precision. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.12 times less risky than Chunghwa Precision. The stock trades about -0.2 of its potential returns per unit of risk. The Chunghwa Precision Test is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  75,200  in Chunghwa Precision Test on December 4, 2024 and sell it today you would lose (2,200) from holding Chunghwa Precision Test or give up 2.93% of portfolio value over 90 days.

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

Citigroup  vs.  Chunghwa Precision Test

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

Chunghwa Precision Test

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chunghwa Precision Test 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 Chunghwa Precision

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

The idea behind Citigroup and Chunghwa Precision Test 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..