Correlation Between Citigroup and China Coal

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

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

Diversification Opportunities for Citigroup and China Coal

-0.66

Correlation Coefficient

Citigroup  China Coal

Excellent diversification

The 3 months correlation between Citigroup and China is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Coal Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Coal Energy 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 China Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Coal Energy has no effect on the direction of Citigroup i.e., Citigroup and China Coal go up and down completely randomly.

Pair Corralation between Citigroup and China Coal

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.62 times more return on investment than China Coal. However, Citigroup is 1.61 times less risky than China Coal. It trades about 0.12 of its potential returns per unit of risk. China Coal Energy is currently generating about -0.08 per unit of risk. If you would invest  7,038  in Citigroup on November 28, 2024 and sell it today you would earn a total of  776.00  from holding Citigroup or generate 11.03% return on investment over 90 days.

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

Citigroup  vs.  China Coal Energy

Citigroup

Risk-Adjusted Performance

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 may actually be approaching a critical reversion point that can send shares even higher in March 2025.

China Coal Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Coal Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and China Coal

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

The idea behind Citigroup and China Coal Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..