Correlation Between Citigroup and Polar Capital

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

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

Diversification Opportunities for Citigroup and Polar Capital

0.82

Correlation Coefficient

Citigroup  Polar Capital

Very poor diversification

The 3 months correlation between Citigroup and Polar is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Polar Capital Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Funds 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Funds has no effect on the direction of Citigroup i.e., Citigroup and Polar Capital go up and down completely randomly.

Pair Corralation between Citigroup and Polar Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.67 times less return on investment than Polar Capital. In addition to that, Citigroup is 2.0 times more volatile than Polar Capital Funds. It trades about 0.02 of its total potential returns per unit of risk. Polar Capital Funds is currently generating about 0.1 per unit of volatility. If you would invest  34,818  in Polar Capital Funds on September 22, 2024 and sell it today you would earn a total of  479.00  from holding Polar Capital Funds or generate 1.38% return on investment over 90 days.

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

Citigroup  vs.  Polar Capital Funds

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Polar Capital Funds

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Polar Capital Funds are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Polar Capital 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 Polar Capital

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

The idea behind Citigroup and Polar Capital Funds 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.