Correlation Between Citigroup and CITIC Securities

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

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

Diversification Opportunities for Citigroup and CITIC Securities

0.29

Correlation Coefficient

Citigroup  CITIC Securities

Modest diversification

The 3 months correlation between Citigroup and CITIC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CITIC Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC Securities 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 CITIC Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC Securities has no effect on the direction of Citigroup i.e., Citigroup and CITIC Securities go up and down completely randomly.

Pair Corralation between Citigroup and CITIC Securities

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.6 times more return on investment than CITIC Securities. However, Citigroup is 1.66 times less risky than CITIC Securities. It trades about 0.04 of its potential returns per unit of risk. CITIC Securities is currently generating about 0.02 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.97% return on investment over 90 days.

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

Citigroup  vs.  CITIC Securities

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

CITIC Securities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CITIC Securities are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CITIC Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and CITIC Securities

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

The idea behind Citigroup and CITIC Securities 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 Transaction History module to view history of all your transactions and understand their impact on performance.