Correlation Between Citigroup and Foreign Trade

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

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

Diversification Opportunities for Citigroup and Foreign Trade

0.93

Correlation Coefficient

Citigroup  Foreign Trade

Almost no diversification

The 3 months correlation between Citigroup and Foreign is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Foreign Trade Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foreign Trade Bank 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 Foreign Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foreign Trade Bank has no effect on the direction of Citigroup i.e., Citigroup and Foreign Trade go up and down completely randomly.

Pair Corralation between Citigroup and Foreign Trade

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.36 times more return on investment than Foreign Trade. However, Citigroup is 1.36 times more volatile than Foreign Trade Bank. It trades about 0.21 of its potential returns per unit of risk. Foreign Trade Bank is currently generating about 0.2 per unit of risk. If you would invest  5,683  in Citigroup on September 12, 2024 and sell it today you would earn a total of  1,567  from holding Citigroup or generate 27.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Foreign Trade Bank

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Foreign Trade Bank

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Foreign Trade Bank are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Foreign Trade showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Foreign Trade

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

The idea behind Citigroup and Foreign Trade Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.