Correlation Between Citigroup and ACM Research

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

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

Diversification Opportunities for Citigroup and ACM Research

0.51

Correlation Coefficient

Citigroup  ACM Research

Very weak diversification

The 3 months correlation between Citigroup and ACM is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and ACM Research Shanghai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACM Research Shanghai 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 ACM Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACM Research Shanghai has no effect on the direction of Citigroup i.e., Citigroup and ACM Research go up and down completely randomly.

Pair Corralation between Citigroup and ACM Research

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.65 times more return on investment than ACM Research. However, Citigroup is 1.53 times less risky than ACM Research. It trades about 0.02 of its potential returns per unit of risk. ACM Research Shanghai is currently generating about -0.17 per unit of risk. If you would invest  6,895  in Citigroup on September 22, 2024 and sell it today you would earn a total of  24.00  from holding Citigroup or generate 0.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  ACM Research Shanghai

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ACM Research Shanghai

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ACM Research Shanghai are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ACM Research sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and ACM Research

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

The idea behind Citigroup and ACM Research Shanghai 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.