Correlation Between Citigroup and Paradigm

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

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

Diversification Opportunities for Citigroup and Paradigm

0.79

Correlation Coefficient

Citigroup  Paradigm

Poor diversification

The 3 months correlation between Citigroup and Paradigm is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Paradigm SP GSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm SP GSCI 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 Paradigm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm SP GSCI has no effect on the direction of Citigroup i.e., Citigroup and Paradigm go up and down completely randomly.

Pair Corralation between Citigroup and Paradigm

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Paradigm. In addition to that, Citigroup is 2.08 times more volatile than Paradigm SP GSCI. It trades about -0.2 of its total potential returns per unit of risk. Paradigm SP GSCI is currently generating about -0.2 per unit of volatility. If you would invest  2,073  in Paradigm SP GSCI on December 4, 2024 and sell it today you would lose (96.00) from holding Paradigm SP GSCI or give up 4.63% of portfolio value over 90 days.

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

Citigroup  vs.  Paradigm SP GSCI

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Paradigm SP GSCI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paradigm SP GSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Paradigm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Paradigm

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

The idea behind Citigroup and Paradigm SP GSCI 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.