Correlation Between HE Equipment and Citigroup
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
HE Equipment Services vs. Citigroup
Performance |
Timeline |
HE Equipment Services |
Citigroup |
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.HE Equipment vs. Ryder System | HE Equipment vs. Vestis | HE Equipment vs. Triton International Limited | HE Equipment vs. Triton International Limited |
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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 the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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