Correlation Between Citigroup and Fosun International

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

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

Diversification Opportunities for Citigroup and Fosun International

-0.69

Correlation Coefficient

Citigroup  Fosun International

Excellent diversification

The 3 months correlation between Citigroup and Fosun is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Fosun International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fosun International 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 Fosun International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fosun International has no effect on the direction of Citigroup i.e., Citigroup and Fosun International go up and down completely randomly.

Pair Corralation between Citigroup and Fosun International

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Fosun International. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 3.01 times less risky than Fosun International. The stock trades about -0.04 of its potential returns per unit of risk. The Fosun International is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Fosun International on December 1, 2024 and sell it today you would earn a total of  10.00  from holding Fosun International or generate 22.22% return on investment over 90 days.

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

Citigroup  vs.  Fosun International

Citigroup

Risk-Adjusted Performance

OK

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fosun International

Risk-Adjusted Performance

Weak

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

Pair Trading with Citigroup and Fosun International

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

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