Correlation Between Citigroup and Long Giang

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

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

Diversification Opportunities for Citigroup and Long Giang

-0.4

Correlation Coefficient

Citigroup  Long Giang

Very good diversification

The 3 months correlation between Citigroup and Long is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Long Giang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Giang Investment 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 Long Giang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Giang Investment has no effect on the direction of Citigroup i.e., Citigroup and Long Giang go up and down completely randomly.

Pair Corralation between Citigroup and Long Giang

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Long Giang. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.4 times less risky than Long Giang. The stock trades about -0.05 of its potential returns per unit of risk. The Long Giang Investment is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  242,000  in Long Giang Investment on October 2, 2024 and sell it today you would earn a total of  13,000  from holding Long Giang Investment or generate 5.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Long Giang Investment

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

Long Giang Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Long Giang Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Long Giang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Long Giang

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

The idea behind Citigroup and Long Giang Investment 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.