Correlation Between HSBC Holdings and Citigroup
Can any of the company-specific risk be diversified away by investing in both HSBC Holdings 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 HSBC Holdings and Citigroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HSBC Holdings PLC and Citigroup, you can compare the effects of market volatilities on HSBC Holdings 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 HSBC Holdings with a short position of Citigroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of HSBC Holdings and Citigroup.
Diversification Opportunities for HSBC Holdings and Citigroup
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HSBC and Citigroup is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding HSBC Holdings PLC and Citigroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citigroup and HSBC Holdings 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 HSBC Holdings PLC 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 HSBC Holdings i.e., HSBC Holdings and Citigroup go up and down completely randomly.
Pair Corralation between HSBC Holdings and Citigroup
Given the investment horizon of 90 days HSBC Holdings is expected to generate 1.34 times less return on investment than Citigroup. But when comparing it to its historical volatility, HSBC Holdings PLC is 1.09 times less risky than Citigroup. It trades about 0.08 of its potential returns per unit of risk. Citigroup is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,567 in Citigroup on January 26, 2024 and sell it today you would earn a total of 1,680 from holding Citigroup or generate 36.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HSBC Holdings PLC vs. Citigroup
Performance |
| Timeline |
| HSBC Holdings PLC |
| Citigroup |
HSBC Holdings and Citigroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HSBC Holdings and Citigroup
The main advantage of trading using opposite HSBC Holdings and Citigroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HSBC Holdings 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.| HSBC Holdings vs. ING Group NV | HSBC Holdings vs. Natwest Group PLC | HSBC Holdings vs. Banco Santander SA | HSBC Holdings vs. UBS Group AG |
| Citigroup vs. JPMorgan Chase Co | Citigroup vs. Wells Fargo | Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu 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 the Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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