Correlation Between Citigroup and SIMCERE PHARMAC

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

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

Diversification Opportunities for Citigroup and SIMCERE PHARMAC

0.56

Correlation Coefficient

Citigroup  SIMCERE PHARMAC

Very weak diversification

The 3 months correlation between Citigroup and SIMCERE is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and SIMCERE PHARMAC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMCERE PHARMAC GRP 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 SIMCERE PHARMAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMCERE PHARMAC GRP has no effect on the direction of Citigroup i.e., Citigroup and SIMCERE PHARMAC go up and down completely randomly.

Pair Corralation between Citigroup and SIMCERE PHARMAC

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.58 times more return on investment than SIMCERE PHARMAC. However, Citigroup is 1.74 times less risky than SIMCERE PHARMAC. It trades about 0.08 of its potential returns per unit of risk. SIMCERE PHARMAC GRP is currently generating about 0.01 per unit of risk. If you would invest  6,975  in Citigroup on September 27, 2024 and sell it today you would earn a total of  125.00  from holding Citigroup or generate 1.79% return on investment over 90 days.

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

Citigroup  vs.  SIMCERE PHARMAC GRP

Citigroup

Risk-Adjusted Performance

10 of 100

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

SIMCERE PHARMAC GRP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SIMCERE PHARMAC GRP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SIMCERE PHARMAC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and SIMCERE PHARMAC

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

The idea behind Citigroup and SIMCERE PHARMAC GRP 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.