Correlation Between Citigroup and Aerospace

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

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

Diversification Opportunities for Citigroup and Aerospace

0.57

Correlation Coefficient

Citigroup  Aerospace

Very weak diversification

The 3 months correlation between Citigroup and Aerospace is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Aerospace Hi Tech Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Hi Tech 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 Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Hi Tech has no effect on the direction of Citigroup i.e., Citigroup and Aerospace go up and down completely randomly.

Pair Corralation between Citigroup and Aerospace

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.61 times more return on investment than Aerospace. However, Citigroup is 1.63 times less risky than Aerospace. It trades about -0.05 of its potential returns per unit of risk. Aerospace Hi Tech Holding is currently generating about -0.04 per unit of risk. If you would invest  7,075  in Citigroup on September 24, 2024 and sell it today you would lose (98.00) from holding Citigroup or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Citigroup  vs.  Aerospace Hi Tech Holding

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.

Aerospace Hi Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerospace Hi Tech Holding are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Aerospace

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

The idea behind Citigroup and Aerospace Hi Tech Holding 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.