Correlation Between Citigroup and Nanhua Bio

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Can any of the company-specific risk be diversified away by investing in both Citigroup and Nanhua Bio 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 Nanhua Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Nanhua Bio Medicine, you can compare the effects of market volatilities on Citigroup and Nanhua Bio 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 Nanhua Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Nanhua Bio.

Diversification Opportunities for Citigroup and Nanhua Bio

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Citigroup and Nanhua is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Nanhua Bio Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanhua Bio Medicine 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 Nanhua Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanhua Bio Medicine has no effect on the direction of Citigroup i.e., Citigroup and Nanhua Bio go up and down completely randomly.

Pair Corralation between Citigroup and Nanhua Bio

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.48 times more return on investment than Nanhua Bio. However, Citigroup is 2.06 times less risky than Nanhua Bio. It trades about 0.07 of its potential returns per unit of risk. Nanhua Bio Medicine is currently generating about 0.0 per unit of risk. If you would invest  4,206  in Citigroup on August 26, 2024 and sell it today you would earn a total of  2,778  from holding Citigroup or generate 66.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy96.18%
ValuesDaily Returns

Citigroup  vs.  Nanhua Bio Medicine

 Performance 
       Timeline  
Citigroup 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.
Nanhua Bio Medicine 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Nanhua Bio Medicine are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nanhua Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Citigroup and Nanhua Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and Nanhua Bio

The main advantage of trading using opposite Citigroup and Nanhua Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Nanhua Bio 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 Nanhua Bio will offset losses from the drop in Nanhua Bio's long position.
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The idea behind Citigroup and Nanhua Bio Medicine 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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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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