Correlation Between Citigroup and Guangzhou Baiyunshan

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

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

Diversification Opportunities for Citigroup and Guangzhou Baiyunshan

0.52

Correlation Coefficient

Citigroup  Guangzhou Baiyunshan

Very weak diversification

The 3 months correlation between Citigroup and Guangzhou is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan 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 Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of Citigroup i.e., Citigroup and Guangzhou Baiyunshan go up and down completely randomly.

Pair Corralation between Citigroup and Guangzhou Baiyunshan

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.49 times more return on investment than Guangzhou Baiyunshan. However, Citigroup is 2.03 times less risky than Guangzhou Baiyunshan. It trades about 0.14 of its potential returns per unit of risk. Guangzhou Baiyunshan Pharmaceutical is currently generating about 0.06 per unit of risk. If you would invest  3,705  in Citigroup on September 24, 2024 and sell it today you would earn a total of  3,214  from holding Citigroup or generate 86.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.64%
Values	Daily Returns

Citigroup  vs.  Guangzhou Baiyunshan Pharmaceu

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) 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.

Guangzhou Baiyunshan

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangzhou Baiyunshan Pharmaceutical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Guangzhou Baiyunshan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Guangzhou Baiyunshan

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

The idea behind Citigroup and Guangzhou Baiyunshan Pharmaceutical 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.