Correlation Between Citigroup and HNX

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

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

Diversification Opportunities for Citigroup and HNX

-0.26

Correlation Coefficient

Citigroup  HNX

Very good diversification

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

Pair Corralation between Citigroup and HNX

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.69 times more return on investment than HNX. However, Citigroup is 3.69 times more volatile than HNX. It trades about -0.04 of its potential returns per unit of risk. HNX is currently generating about -0.24 per unit of risk. If you would invest  7,186  in Citigroup on October 8, 2024 and sell it today you would lose (86.00) from holding Citigroup or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Citigroup  vs.  HNX

Pair Trading with Citigroup and HNX

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

The idea behind Citigroup and HNX 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.