Correlation Between Citigroup and Shui Mu

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

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

Diversification Opportunities for Citigroup and Shui Mu

-0.61

Correlation Coefficient

Citigroup  Shui Mu

Excellent diversification

The 3 months correlation between Citigroup and Shui is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Shui Mu International Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shui Mu International 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 Shui Mu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shui Mu International has no effect on the direction of Citigroup i.e., Citigroup and Shui Mu go up and down completely randomly.

Pair Corralation between Citigroup and Shui Mu

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.26 times more return on investment than Shui Mu. However, Citigroup is 1.26 times more volatile than Shui Mu International Co. It trades about -0.04 of its potential returns per unit of risk. Shui Mu International Co is currently generating about -0.1 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	Weak
Accuracy	95.0%
Values	Daily Returns

Citigroup  vs.  Shui Mu International Co

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.

Shui Mu International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shui Mu International Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Shui Mu is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Shui Mu

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

The idea behind Citigroup and Shui Mu International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.