Correlation Between Citigroup and General Motors

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

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

Diversification Opportunities for Citigroup and General Motors

0.46

Correlation Coefficient

Citigroup  General Motors

Very weak diversification

The 3 months correlation between Citigroup and General is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and General Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 General Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Citigroup i.e., Citigroup and General Motors go up and down completely randomly.

Pair Corralation between Citigroup and General Motors

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.71 times more return on investment than General Motors. However, Citigroup is 1.41 times less risky than General Motors. It trades about 0.16 of its potential returns per unit of risk. General Motors Co is currently generating about 0.03 per unit of risk. If you would invest  6,209  in Citigroup on October 15, 2024 and sell it today you would earn a total of  1,068  from holding Citigroup or generate 17.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Citigroup  vs.  General Motors Co

Citigroup

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 12 (%) 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.

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, General Motors is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and General Motors

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

The idea behind Citigroup and General Motors Co 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.