Correlation Between Citigroup and BYD Company

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

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

Diversification Opportunities for Citigroup and BYD Company

-0.25

Correlation Coefficient

Citigroup  BYD Company

Very good diversification

The 3 months correlation between Citigroup and BYD is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and BYD Company Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BYD Limited 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 BYD Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BYD Limited has no effect on the direction of Citigroup i.e., Citigroup and BYD Company go up and down completely randomly.

Pair Corralation between Citigroup and BYD Company

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.85 times less return on investment than BYD Company. But when comparing it to its historical volatility, Citigroup is 1.68 times less risky than BYD Company. It trades about 0.03 of its potential returns per unit of risk. BYD Company Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,445  in BYD Company Limited on December 28, 2024 and sell it today you would earn a total of  1,655  from holding BYD Company Limited or generate 48.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  BYD Company Limited

Citigroup

Risk-Adjusted Performance

Weak

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

BYD Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BYD Company Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, BYD Company reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and BYD Company

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

The idea behind Citigroup and BYD Company Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.