Correlation Between Citigroup and Dai Nippon

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

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

Diversification Opportunities for Citigroup and Dai Nippon

0.22

Correlation Coefficient

Citigroup  Dai Nippon

Modest diversification

The 3 months correlation between Citigroup and Dai is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dai Nippon Printing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dai Nippon Printing 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 Dai Nippon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dai Nippon Printing has no effect on the direction of Citigroup i.e., Citigroup and Dai Nippon go up and down completely randomly.

Pair Corralation between Citigroup and Dai Nippon

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Dai Nippon. In addition to that, Citigroup is 1.07 times more volatile than Dai Nippon Printing. It trades about -0.04 of its total potential returns per unit of risk. Dai Nippon Printing is currently generating about 0.02 per unit of volatility. If you would invest  736.00  in Dai Nippon Printing on December 10, 2024 and sell it today you would earn a total of  5.00  from holding Dai Nippon Printing or generate 0.68% 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.  Dai Nippon Printing

Citigroup

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Dai Nippon Printing

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dai Nippon Printing are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Dai Nippon is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Dai Nippon

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

The idea behind Citigroup and Dai Nippon Printing 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.