Correlation Between Japan Asia and Citigroup

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

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

Diversification Opportunities for Japan Asia and Citigroup

0.3

Correlation Coefficient

Japan Asia  Citigroup

Weak diversification

The 3 months correlation between Japan and Citigroup is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and Japan Asia 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 Japan Asia Investment are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of Japan Asia i.e., Japan Asia and Citigroup go up and down completely randomly.

Pair Corralation between Japan Asia and Citigroup

Assuming the 90 days horizon Japan Asia is expected to generate 31.27 times less return on investment than Citigroup. But when comparing it to its historical volatility, Japan Asia Investment is 1.28 times less risky than Citigroup. It trades about 0.01 of its potential returns per unit of risk. Citigroup is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,797  in Citigroup on October 9, 2024 and sell it today you would earn a total of  1,292  from holding Citigroup or generate 22.29% return on investment over 90 days.

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

Japan Asia Investment  vs.  Citigroup

Japan Asia Investment

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Japan Asia Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Japan Asia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Asia and Citigroup

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

The idea behind Japan Asia Investment and Citigroup 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.