Correlation Between Citigroup and Daiwa Securities

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

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

Diversification Opportunities for Citigroup and Daiwa Securities

0.38

Correlation Coefficient

Citigroup  Daiwa Securities

Weak diversification

The 3 months correlation between Citigroup and Daiwa is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa 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 Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of Citigroup i.e., Citigroup and Daiwa Securities go up and down completely randomly.

Pair Corralation between Citigroup and Daiwa Securities

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.56 times more return on investment than Daiwa Securities. However, Citigroup is 1.8 times less risky than Daiwa Securities. It trades about 0.02 of its potential returns per unit of risk. Daiwa Securities Group is currently generating about -0.27 per unit of risk. If you would invest  7,075  in Citigroup on September 26, 2024 and sell it today you would earn a total of  25.00  from holding Citigroup or generate 0.35% 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.  Daiwa Securities Group

Citigroup

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Daiwa Securities

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

The idea behind Citigroup and Daiwa Securities Group 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.