Correlation Between China Construction and Citigroup

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Can any of the company-specific risk be diversified away by investing in both China Construction and Citigroup 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 China Construction and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Construction Bank and Citigroup, you can compare the effects of market volatilities on China Construction and Citigroup 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 China Construction with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Construction and Citigroup.

Diversification Opportunities for China Construction and Citigroup

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between China and Citigroup is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding China Construction Bank and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and China Construction 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 China Construction Bank are associated (or correlated) with Citigroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citigroup has no effect on the direction of China Construction i.e., China Construction and Citigroup go up and down completely randomly.

Pair Corralation between China Construction and Citigroup

Assuming the 90 days horizon China Construction Bank is expected to generate 0.58 times more return on investment than Citigroup. However, China Construction Bank is 1.73 times less risky than Citigroup. It trades about -0.01 of its potential returns per unit of risk. Citigroup is currently generating about -0.03 per unit of risk. If you would invest  1,265  in China Construction Bank on September 5, 2022 and sell it today you would lose (58.00)  from holding China Construction Bank or give up 4.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

China Construction Bank  vs.  Citigroup

 Performance (%) 
       Timeline  
China Construction Bank 
China Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in China Construction Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, China Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

China Price Channel

Citigroup 
Citigroup Performance
0 of 100
Over the last 90 days Citigroup has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Citigroup is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Citigroup Price Channel

China Construction and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with China Construction and Citigroup

The main advantage of trading using opposite China Construction and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Construction position performs unexpectedly, Citigroup 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 Citigroup will offset losses from the drop in Citigroup's long position.
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The idea behind China Construction Bank and Citigroup 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.
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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 CEO Directory module to screen CEOs from public companies around the world.

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