Correlation Between Citigroup and Compal Electronics
Can any of the company-specific risk be diversified away by investing in both Citigroup and Compal Electronics 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 Compal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Compal Electronics, you can compare the effects of market volatilities on Citigroup and Compal Electronics 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 Compal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Compal Electronics.
Diversification Opportunities for Citigroup and Compal Electronics
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Compal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Compal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compal Electronics 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 Compal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compal Electronics has no effect on the direction of Citigroup i.e., Citigroup and Compal Electronics go up and down completely randomly.
Pair Corralation between Citigroup and Compal Electronics
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.18 times more return on investment than Compal Electronics. However, Citigroup is 1.18 times more volatile than Compal Electronics. It trades about 0.07 of its potential returns per unit of risk. Compal Electronics is currently generating about 0.0 per unit of risk. If you would invest 6,079 in Citigroup on August 31, 2024 and sell it today you would earn a total of 1,008 from holding Citigroup or generate 16.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Compal Electronics
Performance |
| Timeline |
| Citigroup |
| Compal Electronics |
Citigroup and Compal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Compal Electronics
The main advantage of trading using opposite Citigroup and Compal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Compal Electronics 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 Compal Electronics will offset losses from the drop in Compal Electronics' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| Compal Electronics vs. Quanta Computer | Compal Electronics vs. Inventec Corp | Compal Electronics vs. Asustek Computer | Compal Electronics vs. Acer Inc |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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