Correlation Between Citigroup and COSCO SHIPPING

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

Diversification Opportunities for Citigroup and COSCO SHIPPING

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Citigroup and COSCO is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and COSCO SHIPPING HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COSCO SHIPPING HOLDINGS 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 COSCO SHIPPING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COSCO SHIPPING HOLDINGS has no effect on the direction of Citigroup i.e., Citigroup and COSCO SHIPPING go up and down completely randomly.

Pair Corralation between Citigroup and COSCO SHIPPING

Taking into account the 90-day investment horizon Citigroup is expected to generate 9.39 times less return on investment than COSCO SHIPPING. But when comparing it to its historical volatility, Citigroup is 2.24 times less risky than COSCO SHIPPING. It trades about 0.02 of its potential returns per unit of risk. COSCO SHIPPING HOLDINGS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  412.00  in COSCO SHIPPING HOLDINGS on May 19, 2022 and sell it today you would earn a total of  934.00  from holding COSCO SHIPPING HOLDINGS or generate 226.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy77.82%
ValuesDaily Returns

Citigroup  vs.  COSCO SHIPPING HOLDINGS

 Performance (%) 
       Timeline  
Citigroup 
Citigroup Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Citigroup Price Channel

COSCO SHIPPING HOLDINGS 
COSCO Performance
0 of 100
Over the last 90 days COSCO SHIPPING HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

COSCO Price Channel

Citigroup and COSCO SHIPPING Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Citigroup and COSCO SHIPPING

The main advantage of trading using opposite Citigroup and COSCO SHIPPING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, COSCO SHIPPING 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 COSCO SHIPPING will offset losses from the drop in COSCO SHIPPING's long position.
The idea behind Citigroup and COSCO SHIPPING HOLDINGS 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.

COSCO SHIPPING HOLDINGS

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against COSCO SHIPPING as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. COSCO SHIPPING's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, COSCO SHIPPING's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to COSCO SHIPPING HOLDINGS.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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