Correlation Between Citigroup and Hang Lung

Can any of the company-specific risk be diversified away by investing in both Citigroup and Hang Lung 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 Hang Lung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Hang Lung Properties, you can compare the effects of market volatilities on Citigroup and Hang Lung 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 Hang Lung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Hang Lung.

Diversification Opportunities for Citigroup and Hang Lung

-0.7

Correlation Coefficient

Citigroup  Hang Lung

Excellent diversification

The 3 months correlation between Citigroup and Hang is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hang Lung Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Properties 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 Hang Lung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Lung Properties has no effect on the direction of Citigroup i.e., Citigroup and Hang Lung go up and down completely randomly.

Pair Corralation between Citigroup and Hang Lung

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.64 times more return on investment than Hang Lung. However, Citigroup is 1.56 times less risky than Hang Lung. It trades about 0.11 of its potential returns per unit of risk. Hang Lung Properties is currently generating about -0.07 per unit of risk. If you would invest  4,301  in Citigroup on January 19, 2024 and sell it today you would earn a total of  1,531  from holding Citigroup or generate 35.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Hang Lung Properties

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hang Lung Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hang Lung Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citigroup and Hang Lung

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

The idea behind Citigroup and Hang Lung Properties 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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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.