Correlation Between Citigroup and Farsoon Technology

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

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

Diversification Opportunities for Citigroup and Farsoon Technology

-0.3

Correlation Coefficient

Citigroup  Farsoon Technology

Very good diversification

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

Pair Corralation between Citigroup and Farsoon Technology

Taking into account the 90-day investment horizon Citigroup is expected to generate 22.77 times less return on investment than Farsoon Technology. But when comparing it to its historical volatility, Citigroup is 2.6 times less risky than Farsoon Technology. It trades about 0.03 of its potential returns per unit of risk. Farsoon Technology Co is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,125  in Farsoon Technology Co on December 24, 2024 and sell it today you would earn a total of  1,855  from holding Farsoon Technology Co or generate 87.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Citigroup  vs.  Farsoon Technology Co

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

Farsoon Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Farsoon Technology Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Farsoon Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Farsoon Technology

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

The idea behind Citigroup and Farsoon Technology Co 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.