Correlation Between Citigroup and Mitsubishi UFJ

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

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

Diversification Opportunities for Citigroup and Mitsubishi UFJ

0.97

Correlation Coefficient

Citigroup  Mitsubishi UFJ

Almost no diversification

The 3 months correlation between Citigroup and Mitsubishi is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Mitsubishi UFJ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsubishi UFJ Financial 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 Mitsubishi UFJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsubishi UFJ Financial has no effect on the direction of Citigroup i.e., Citigroup and Mitsubishi UFJ go up and down completely randomly.

Pair Corralation between Citigroup and Mitsubishi UFJ

Assuming the 90 days trading horizon Citigroup is expected to generate 1.03 times more return on investment than Mitsubishi UFJ. However, Citigroup is 1.03 times more volatile than Mitsubishi UFJ Financial. It trades about 0.23 of its potential returns per unit of risk. Mitsubishi UFJ Financial is currently generating about 0.21 per unit of risk. If you would invest  5,176  in Citigroup on September 15, 2024 and sell it today you would earn a total of  1,601  from holding Citigroup or generate 30.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Citigroup  vs.  Mitsubishi UFJ Financial

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Mitsubishi UFJ Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsubishi UFJ Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Mitsubishi UFJ unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Mitsubishi UFJ

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

The idea behind Citigroup and Mitsubishi UFJ Financial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.