Correlation Between Citigroup and Far East

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

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

Diversification Opportunities for Citigroup and Far East

0.43

Correlation Coefficient

Citigroup  Far East

Very weak diversification

The 3 months correlation between Citigroup and Far is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Far East Horizon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far East Horizon 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 Far East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far East Horizon has no effect on the direction of Citigroup i.e., Citigroup and Far East go up and down completely randomly.

Pair Corralation between Citigroup and Far East

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Far East. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 2.15 times less risky than Far East. The stock trades about -0.03 of its potential returns per unit of risk. The Far East Horizon is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Far East Horizon on September 23, 2024 and sell it today you would earn a total of  7.00  from holding Far East Horizon or generate 12.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Far East Horizon

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Far East Horizon

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Far East Horizon are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Far East reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Far East

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

The idea behind Citigroup and Far East Horizon 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.