Correlation Between Citigroup and China National

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

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

Diversification Opportunities for Citigroup and China National

-0.2

Correlation Coefficient

Citigroup  China National

Good diversification

The 3 months correlation between Citigroup and China is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China National Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China National Electric 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 China National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China National Electric has no effect on the direction of Citigroup i.e., Citigroup and China National go up and down completely randomly.

Pair Corralation between Citigroup and China National

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.69 times less return on investment than China National. But when comparing it to its historical volatility, Citigroup is 1.02 times less risky than China National. It trades about 0.04 of its potential returns per unit of risk. China National Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,133  in China National Electric on December 23, 2024 and sell it today you would earn a total of  153.00  from holding China National Electric or generate 7.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Citigroup  vs.  China National Electric

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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.

China National Electric

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China National Electric are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China National may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and China National

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

The idea behind Citigroup and China National Electric 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..