Correlation Between Citigroup and China DatangRenewable
Can any of the company-specific risk be diversified away by investing in both Citigroup and China DatangRenewable 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 DatangRenewable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and China Datang, you can compare the effects of market volatilities on Citigroup and China DatangRenewable 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 DatangRenewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and China DatangRenewable.
Diversification Opportunities for Citigroup and China DatangRenewable
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and China is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Datang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China DatangRenewable 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 DatangRenewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China DatangRenewable has no effect on the direction of Citigroup i.e., Citigroup and China DatangRenewable go up and down completely randomly.
Pair Corralation between Citigroup and China DatangRenewable
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.8 times less return on investment than China DatangRenewable. But when comparing it to its historical volatility, Citigroup is 2.86 times less risky than China DatangRenewable. It trades about 0.07 of its potential returns per unit of risk. China Datang is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 15.00 in China Datang on September 3, 2024 and sell it today you would earn a total of 8.00 from holding China Datang or generate 53.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.14% |
| Values | Daily Returns |
Citigroup vs. China Datang
Performance |
| Timeline |
| Citigroup |
| China DatangRenewable |
Citigroup and China DatangRenewable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and China DatangRenewable
The main advantage of trading using opposite Citigroup and China DatangRenewable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, China DatangRenewable 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 DatangRenewable will offset losses from the drop in China DatangRenewable'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 Global Correlations module to find global opportunities by holding instruments from different markets.
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