Correlation Between Citigroup and MTR

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

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

Diversification Opportunities for Citigroup and MTR

-0.2

Correlation Coefficient

Citigroup  MTR

Good diversification

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

Pair Corralation between Citigroup and MTR

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.9 times less return on investment than MTR. But when comparing it to its historical volatility, Citigroup is 1.1 times less risky than MTR. It trades about 0.07 of its potential returns per unit of risk. MTR Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  248.00  in MTR Limited on September 23, 2024 and sell it today you would earn a total of  80.00  from holding MTR Limited or generate 32.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.69%
Values	Daily Returns

Citigroup  vs.  MTR Limited

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

MTR Limited

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MTR Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MTR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and MTR

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

The idea behind Citigroup and MTR Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.