Correlation Between Citigroup and Guotai Epoint

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

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

Diversification Opportunities for Citigroup and Guotai Epoint

-0.3

Correlation Coefficient

Citigroup  Guotai Epoint

Very good diversification

The 3 months correlation between Citigroup and Guotai is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Guotai Epoint Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guotai Epoint Software 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 Guotai Epoint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guotai Epoint Software has no effect on the direction of Citigroup i.e., Citigroup and Guotai Epoint go up and down completely randomly.

Pair Corralation between Citigroup and Guotai Epoint

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.67 times more return on investment than Guotai Epoint. However, Citigroup is 1.49 times less risky than Guotai Epoint. It trades about -0.04 of its potential returns per unit of risk. Guotai Epoint Software is currently generating about -0.48 per unit of risk. If you would invest  7,186  in Citigroup on October 8, 2024 and sell it today you would lose (86.00) from holding Citigroup or give up 1.2% of portfolio value over 90 days.

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

Citigroup  vs.  Guotai Epoint Software

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Guotai Epoint Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guotai Epoint Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and Guotai Epoint

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

The idea behind Citigroup and Guotai Epoint Software 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .