Correlation Between Citigroup and Matthews Asia

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

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

Diversification Opportunities for Citigroup and Matthews Asia

-0.2

Correlation Coefficient

Citigroup  Matthews Asia

Good diversification

The 3 months correlation between Citigroup and Matthews is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Matthews Asia Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthews Asia Dividend 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 Matthews Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthews Asia Dividend has no effect on the direction of Citigroup i.e., Citigroup and Matthews Asia go up and down completely randomly.

Pair Corralation between Citigroup and Matthews Asia

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.64 times more return on investment than Matthews Asia. However, Citigroup is 2.64 times more volatile than Matthews Asia Dividend. It trades about 0.2 of its potential returns per unit of risk. Matthews Asia Dividend is currently generating about -0.13 per unit of risk. If you would invest  6,412  in Citigroup on August 30, 2024 and sell it today you would earn a total of  604.00  from holding Citigroup or generate 9.42% return on investment over 90 days.

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

Citigroup  vs.  Matthews Asia Dividend

Citigroup

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) 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.

Matthews Asia Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matthews Asia Dividend has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Matthews Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Matthews Asia

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

The idea behind Citigroup and Matthews Asia Dividend 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.