Correlation Between Citigroup and Zhangmen Education

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

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

Diversification Opportunities for Citigroup and Zhangmen Education

-0.09

Correlation Coefficient

Citigroup  Zhangmen Education

Good diversification

The 3 months correlation between Citigroup and Zhangmen is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Zhangmen Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhangmen Education 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 Zhangmen Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhangmen Education has no effect on the direction of Citigroup i.e., Citigroup and Zhangmen Education go up and down completely randomly.

Pair Corralation between Citigroup and Zhangmen Education

Taking into account the 90-day investment horizon Citigroup is expected to generate 54.72 times less return on investment than Zhangmen Education. But when comparing it to its historical volatility, Citigroup is 14.44 times less risky than Zhangmen Education. It trades about 0.07 of its potential returns per unit of risk. Zhangmen Education is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Zhangmen Education on September 20, 2024 and sell it today you would earn a total of  33.00  from holding Zhangmen Education or generate 194.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.44%
Values	Daily Returns

Citigroup  vs.  Zhangmen Education

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

Zhangmen Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhangmen Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Zhangmen Education 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 Zhangmen Education

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

The idea behind Citigroup and Zhangmen Education 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..