Correlation Between Citigroup and Hafnia

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

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

Diversification Opportunities for Citigroup and Hafnia

-0.26

Correlation Coefficient

Citigroup  Hafnia

Very good diversification

The 3 months correlation between Citigroup and Hafnia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hafnia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia has no effect on the direction of Citigroup i.e., Citigroup and Hafnia go up and down completely randomly.

Pair Corralation between Citigroup and Hafnia

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.62 times more return on investment than Hafnia. However, Citigroup is 1.62 times less risky than Hafnia. It trades about 0.13 of its potential returns per unit of risk. Hafnia is currently generating about -0.04 per unit of risk. If you would invest  7,038  in Citigroup on November 29, 2024 and sell it today you would earn a total of  869.00  from holding Citigroup or generate 12.35% return on investment over 90 days.

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

Citigroup  vs.  Hafnia

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.

Hafnia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hafnia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Citigroup and Hafnia

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

The idea behind Citigroup and Hafnia 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.