Correlation Between Citigroup and AVALON TECHNOLOGIES

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

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

Diversification Opportunities for Citigroup and AVALON TECHNOLOGIES

0.88

Correlation Coefficient

Citigroup  AVALON TECHNOLOGIES

Very poor diversification

The 3 months correlation between Citigroup and AVALON is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and AVALON TECHNOLOGIES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVALON TECHNOLOGIES LTD 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 AVALON TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVALON TECHNOLOGIES LTD has no effect on the direction of Citigroup i.e., Citigroup and AVALON TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Citigroup and AVALON TECHNOLOGIES

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.2 times less return on investment than AVALON TECHNOLOGIES. But when comparing it to its historical volatility, Citigroup is 1.78 times less risky than AVALON TECHNOLOGIES. It trades about 0.07 of its potential returns per unit of risk. AVALON TECHNOLOGIES LTD is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  39,800  in AVALON TECHNOLOGIES LTD on August 31, 2024 and sell it today you would earn a total of  54,005  from holding AVALON TECHNOLOGIES LTD or generate 135.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.01%
Values	Daily Returns

Citigroup  vs.  AVALON TECHNOLOGIES LTD

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.

AVALON TECHNOLOGIES LTD

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AVALON TECHNOLOGIES LTD are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady essential indicators, AVALON TECHNOLOGIES sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and AVALON TECHNOLOGIES

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

The idea behind Citigroup and AVALON TECHNOLOGIES LTD 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.