Correlation Between Citigroup and Danang Rubber

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

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

Diversification Opportunities for Citigroup and Danang Rubber

-0.35

Correlation Coefficient

Citigroup  Danang Rubber

Very good diversification

The 3 months correlation between Citigroup and Danang is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Danang Rubber JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Rubber JSC 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 Danang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Rubber JSC has no effect on the direction of Citigroup i.e., Citigroup and Danang Rubber go up and down completely randomly.

Pair Corralation between Citigroup and Danang Rubber

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.98 times more return on investment than Danang Rubber. However, Citigroup is 1.02 times less risky than Danang Rubber. It trades about 0.07 of its potential returns per unit of risk. Danang Rubber JSC is currently generating about -0.03 per unit of risk. If you would invest  5,549  in Citigroup on December 5, 2024 and sell it today you would earn a total of  1,686  from holding Citigroup or generate 30.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.59%
Values	Daily Returns

Citigroup  vs.  Danang Rubber JSC

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Danang Rubber JSC

Risk-Adjusted Performance

Weak

Over the last 90 days Danang Rubber JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Danang Rubber is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Danang Rubber

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

The idea behind Citigroup and Danang Rubber JSC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.