Correlation Between HE Equipment and Citigroup

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

Diversification Opportunities for HE Equipment and Citigroup

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between HEES and Citigroup is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Citigroup go up and down completely randomly.

Pair Corralation between HE Equipment and Citigroup

Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.49 times more return on investment than Citigroup. However, HE Equipment is 1.49 times more volatile than Citigroup. It trades about 0.06 of its potential returns per unit of risk. Citigroup is currently generating about 0.04 per unit of risk. If you would invest  3,530  in HE Equipment Services on December 29, 2023 and sell it today you would earn a total of  2,932  from holding HE Equipment Services or generate 83.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

HE Equipment Services  vs.  Citigroup

 Performance 
       Timeline  
HE Equipment Services 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.
Citigroup 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

HE Equipment and Citigroup Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HE Equipment and Citigroup

The main advantage of trading using opposite HE Equipment and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.
The idea behind HE Equipment Services 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.
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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