Correlation Between Citigroup and HEG
Can any of the company-specific risk be diversified away by investing in both Citigroup and HEG 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 HEG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and HEG Limited, you can compare the effects of market volatilities on Citigroup and HEG 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 HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and HEG.
Diversification Opportunities for Citigroup and HEG
Modest diversification
The 3 months correlation between Citigroup and HEG is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited 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 HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Citigroup i.e., Citigroup and HEG go up and down completely randomly.
Pair Corralation between Citigroup and HEG
Taking into account the 90-day investment horizon Citigroup is expected to generate 0.63 times more return on investment than HEG. However, Citigroup is 1.59 times less risky than HEG. It trades about 0.45 of its potential returns per unit of risk. HEG Limited is currently generating about -0.45 per unit of risk. If you would invest 6,842 in Citigroup on October 20, 2024 and sell it today you would earn a total of 1,157 from holding Citigroup or generate 16.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Citigroup vs. HEG Limited
Performance |
| Timeline |
| Citigroup |
| HEG Limited |
Citigroup and HEG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and HEG
The main advantage of trading using opposite Citigroup and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, HEG 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 HEG will offset losses from the drop in HEG's long position.| Citigroup vs. Bank of Montreal | Citigroup vs. Canadian Imperial Bank | Citigroup vs. Bank of Nova | Citigroup vs. JPMorgan Chase Co |
| HEG vs. Tips Music Limited | HEG vs. Associated Alcohols Breweries | HEG vs. Univa Foods Limited | HEG vs. ZF Commercial Vehicle |
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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