Correlation Between Citigroup and Maeil Dairies
Can any of the company-specific risk be diversified away by investing in both Citigroup and Maeil Dairies 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 Maeil Dairies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Maeil Dairies Co, you can compare the effects of market volatilities on Citigroup and Maeil Dairies 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 Maeil Dairies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Maeil Dairies.
Diversification Opportunities for Citigroup and Maeil Dairies
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Citigroup and Maeil is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Maeil Dairies Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maeil Dairies 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 Maeil Dairies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maeil Dairies has no effect on the direction of Citigroup i.e., Citigroup and Maeil Dairies go up and down completely randomly.
Pair Corralation between Citigroup and Maeil Dairies
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.21 times more return on investment than Maeil Dairies. However, Citigroup is 1.21 times more volatile than Maeil Dairies Co. It trades about 0.21 of its potential returns per unit of risk. Maeil Dairies Co is currently generating about -0.24 per unit of risk. If you would invest 7,142 in Citigroup on November 3, 2024 and sell it today you would earn a total of 1,001 from holding Citigroup or generate 14.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.68% |
| Values | Daily Returns |
Citigroup vs. Maeil Dairies Co
Performance |
| Timeline |
| Citigroup |
| Maeil Dairies |
Citigroup and Maeil Dairies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Maeil Dairies
The main advantage of trading using opposite Citigroup and Maeil Dairies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Maeil Dairies 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 Maeil Dairies will offset losses from the drop in Maeil Dairies' long position.| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Maeil Dairies as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Maeil Dairies' systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Maeil Dairies' unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Maeil Dairies Co.
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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