Correlation Between Citigroup and Financial Street

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

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

Diversification Opportunities for Citigroup and Financial Street

0.7

Correlation Coefficient

Citigroup  Financial Street

Poor diversification

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

Pair Corralation between Citigroup and Financial Street

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.52 times more return on investment than Financial Street. However, Citigroup is 1.91 times less risky than Financial Street. It trades about 0.01 of its potential returns per unit of risk. Financial Street Holdings is currently generating about -0.27 per unit of risk. If you would invest  7,087  in Citigroup on September 29, 2024 and sell it today you would earn a total of  13.00  from holding Citigroup or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.91%
Values	Daily Returns

Citigroup  vs.  Financial Street Holdings

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Financial Street Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Street Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Financial Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Financial Street

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

The idea behind Citigroup and Financial Street Holdings 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.