Correlation Between Citigroup and Kaulin Mfg

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

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

Diversification Opportunities for Citigroup and Kaulin Mfg

0.71

Correlation Coefficient

Citigroup  Kaulin Mfg

Poor diversification

The 3 months correlation between Citigroup and Kaulin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg 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 Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of Citigroup i.e., Citigroup and Kaulin Mfg go up and down completely randomly.

Pair Corralation between Citigroup and Kaulin Mfg

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.23 times more return on investment than Kaulin Mfg. However, Citigroup is 4.32 times less risky than Kaulin Mfg. It trades about 0.27 of its potential returns per unit of risk. Kaulin Mfg is currently generating about -0.06 per unit of risk. If you would invest  6,889  in Citigroup on September 14, 2024 and sell it today you would earn a total of  307.00  from holding Citigroup or generate 4.46% return on investment over 90 days.

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

Citigroup  vs.  Kaulin Mfg

Citigroup

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 14 (%) 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.

Kaulin Mfg

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaulin Mfg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kaulin Mfg is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Citigroup and Kaulin Mfg

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

The idea behind Citigroup and Kaulin Mfg 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.