Correlation Between Citigroup and Daewoo Shipbuilding
Can any of the company-specific risk be diversified away by investing in both Citigroup and Daewoo Shipbuilding 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 Daewoo Shipbuilding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Daewoo Shipbuilding, you can compare the effects of market volatilities on Citigroup and Daewoo Shipbuilding 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 Daewoo Shipbuilding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Daewoo Shipbuilding.
Diversification Opportunities for Citigroup and Daewoo Shipbuilding
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Citigroup and Daewoo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Daewoo Shipbuilding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daewoo Shipbuilding 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 Daewoo Shipbuilding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daewoo Shipbuilding has no effect on the direction of Citigroup i.e., Citigroup and Daewoo Shipbuilding go up and down completely randomly.
Pair Corralation between Citigroup and Daewoo Shipbuilding
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.4 times less return on investment than Daewoo Shipbuilding. But when comparing it to its historical volatility, Citigroup is 2.25 times less risky than Daewoo Shipbuilding. It trades about 0.07 of its potential returns per unit of risk. Daewoo Shipbuilding is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,895,000 in Daewoo Shipbuilding on September 3, 2024 and sell it today you would earn a total of 425,000 from holding Daewoo Shipbuilding or generate 14.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.8% |
| Values | Daily Returns |
Citigroup vs. Daewoo Shipbuilding
Performance |
| Timeline |
| Citigroup |
| Daewoo Shipbuilding |
Citigroup and Daewoo Shipbuilding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Daewoo Shipbuilding
The main advantage of trading using opposite Citigroup and Daewoo Shipbuilding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Daewoo Shipbuilding 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 Daewoo Shipbuilding will offset losses from the drop in Daewoo Shipbuilding's long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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