Correlation Between Citigroup and Sekisui Chemical

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

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

Diversification Opportunities for Citigroup and Sekisui Chemical

0.25

Correlation Coefficient

Citigroup  Sekisui Chemical

Modest diversification

The 3 months correlation between Citigroup and Sekisui is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sekisui Chemical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui Chemical 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 Sekisui Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui Chemical has no effect on the direction of Citigroup i.e., Citigroup and Sekisui Chemical go up and down completely randomly.

Pair Corralation between Citigroup and Sekisui Chemical

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Sekisui Chemical. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 2.16 times less risky than Sekisui Chemical. The stock trades about -0.04 of its potential returns per unit of risk. The Sekisui Chemical Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,550  in Sekisui Chemical Co on October 8, 2024 and sell it today you would earn a total of  188.00  from holding Sekisui Chemical Co or generate 12.13% return on investment over 90 days.

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

Citigroup  vs.  Sekisui Chemical Co

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

Sekisui Chemical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sekisui Chemical Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Sekisui Chemical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Citigroup and Sekisui Chemical

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

The idea behind Citigroup and Sekisui Chemical Co 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.