Correlation Between Citigroup and Shaanxi Lighte

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

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

Diversification Opportunities for Citigroup and Shaanxi Lighte

-0.53

Correlation Coefficient

Citigroup  Shaanxi Lighte

Excellent diversification

The 3 months correlation between Citigroup and Shaanxi is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shaanxi Lighte Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaanxi Lighte Optoe 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 Shaanxi Lighte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaanxi Lighte Optoe has no effect on the direction of Citigroup i.e., Citigroup and Shaanxi Lighte go up and down completely randomly.

Pair Corralation between Citigroup and Shaanxi Lighte

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.88 times more return on investment than Shaanxi Lighte. However, Citigroup is 1.14 times less risky than Shaanxi Lighte. It trades about 0.04 of its potential returns per unit of risk. Shaanxi Lighte Optoelectronics is currently generating about -0.07 per unit of risk. If you would invest  6,929  in Citigroup on December 22, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

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

Citigroup  vs.  Shaanxi Lighte Optoelectronics

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.

Shaanxi Lighte Optoe

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shaanxi Lighte Optoelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Citigroup and Shaanxi Lighte

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

The idea behind Citigroup and Shaanxi Lighte Optoelectronics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.