Correlation Between Citigroup and GDS Holdings

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

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

Diversification Opportunities for Citigroup and GDS Holdings

0.21

Correlation Coefficient

Citigroup  GDS Holdings

Modest diversification

The 3 months correlation between Citigroup and GDS is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and GDS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GDS Holdings 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 GDS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GDS Holdings has no effect on the direction of Citigroup i.e., Citigroup and GDS Holdings go up and down completely randomly.

Pair Corralation between Citigroup and GDS Holdings

Taking into account the 90-day investment horizon Citigroup is expected to generate 15.89 times less return on investment than GDS Holdings. But when comparing it to its historical volatility, Citigroup is 3.79 times less risky than GDS Holdings. It trades about 0.03 of its potential returns per unit of risk. GDS Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,965  in GDS Holdings on December 24, 2024 and sell it today you would earn a total of  802.00  from holding GDS Holdings or generate 40.81% 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.  GDS Holdings

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

GDS Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GDS Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, GDS Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and GDS Holdings

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

The idea behind Citigroup and GDS Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.