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
Weak diversification
The 3 months correlation between Citigroup and HEG is 0.33. 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 10.22 times less return on investment than HEG. But when comparing it to its historical volatility, Citigroup is 6.85 times less risky than HEG. It trades about 0.2 of its potential returns per unit of risk. HEG Limited is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 41,800 in HEG Limited on September 16, 2024 and sell it today you would earn a total of 15,030 from holding HEG Limited or generate 35.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| 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. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings |
| HEG vs. Reliance Industries Limited | HEG vs. Oil Natural Gas | HEG vs. ICICI Bank Limited | HEG vs. Bharti Airtel Limited |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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