Correlation Between Citigroup and China Fund
Can any of the company-specific risk be diversified away by investing in both Citigroup and China Fund 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 China Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and China Fund, you can compare the effects of market volatilities on Citigroup and China Fund 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 China Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and China Fund.
Diversification Opportunities for Citigroup and China Fund
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Citigroup and China is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund 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 China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of Citigroup i.e., Citigroup and China Fund go up and down completely randomly.
Pair Corralation between Citigroup and China Fund
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.91 times more return on investment than China Fund. However, Citigroup is 1.1 times less risky than China Fund. It trades about 0.25 of its potential returns per unit of risk. China Fund is currently generating about -0.19 per unit of risk. If you would invest 6,360 in Citigroup on August 28, 2024 and sell it today you would earn a total of 715.00 from holding Citigroup or generate 11.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. China Fund
Performance |
| Timeline |
| Citigroup |
| China Fund |
Citigroup and China Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and China Fund
The main advantage of trading using opposite Citigroup and China Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, China Fund 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 China Fund will offset losses from the drop in China Fund's long position.The idea behind Citigroup and China Fund 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.| China Fund vs. Ashmore Group Plc | China Fund vs. Mexico Equity And | China Fund vs. Western Asset Managed | China Fund vs. Blackrock Muniholdings Quality |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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