Correlation Between Citigroup and China Resources

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

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

Diversification Opportunities for Citigroup and China Resources

0.16

Correlation Coefficient

Citigroup  China Resources

Average diversification

The 3 months correlation between Citigroup and China is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and China Resources Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Power 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Power has no effect on the direction of Citigroup i.e., Citigroup and China Resources go up and down completely randomly.

Pair Corralation between Citigroup and China Resources

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.13 times more return on investment than China Resources. However, Citigroup is 1.13 times more volatile than China Resources Power. It trades about 0.14 of its potential returns per unit of risk. China Resources Power is currently generating about -0.02 per unit of risk. If you would invest  9,885  in Citigroup on September 12, 2025 and sell it today you would earn a total of  1,289  from holding Citigroup or generate 13.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Citigroup  vs.  China Resources Power

Citigroup

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

China Resources Power

Risk-Adjusted Performance

Weakest

Over the last 90 days China Resources Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and China Resources

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

The idea behind Citigroup and China Resources Power 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.