Correlation Between Citigroup and Sany Heavy

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

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

Diversification Opportunities for Citigroup and Sany Heavy

0.79

Correlation Coefficient

Citigroup  Sany Heavy

Poor diversification

The 3 months correlation between Citigroup and Sany is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sany Heavy Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sany Heavy Energy 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 Sany Heavy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sany Heavy Energy has no effect on the direction of Citigroup i.e., Citigroup and Sany Heavy go up and down completely randomly.

Pair Corralation between Citigroup and Sany Heavy

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.96 times less return on investment than Sany Heavy. But when comparing it to its historical volatility, Citigroup is 3.04 times less risky than Sany Heavy. It trades about 0.23 of its potential returns per unit of risk. Sany Heavy Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,051  in Sany Heavy Energy on September 20, 2024 and sell it today you would earn a total of  220.00  from holding Sany Heavy Energy or generate 7.21% return on investment over 90 days.

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

Citigroup  vs.  Sany Heavy Energy

Citigroup

Risk-Adjusted Performance

10 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Sany Heavy Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sany Heavy Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sany Heavy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Sany Heavy

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

The idea behind Citigroup and Sany Heavy Energy 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.