Correlation Between Citigroup and Toyota Tsusho

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

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

Diversification Opportunities for Citigroup and Toyota Tsusho

0.03

Correlation Coefficient

Citigroup  Toyota Tsusho

Significant diversification

The 3 months correlation between Citigroup and Toyota is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Toyota Tsusho Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Tsusho Corp 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 Toyota Tsusho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Tsusho Corp has no effect on the direction of Citigroup i.e., Citigroup and Toyota Tsusho go up and down completely randomly.

Pair Corralation between Citigroup and Toyota Tsusho

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.79 times more return on investment than Toyota Tsusho. However, Citigroup is 1.26 times less risky than Toyota Tsusho. It trades about 0.08 of its potential returns per unit of risk. Toyota Tsusho Corp is currently generating about 0.05 per unit of risk. If you would invest  4,091  in Citigroup on September 14, 2024 and sell it today you would earn a total of  3,105  from holding Citigroup or generate 75.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.82%
Values	Daily Returns

Citigroup  vs.  Toyota Tsusho Corp

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Toyota Tsusho Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Tsusho Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Toyota Tsusho is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Toyota Tsusho

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

The idea behind Citigroup and Toyota Tsusho Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.