Correlation Between Citigroup and Aerospace Industrial

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

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

Diversification Opportunities for Citigroup and Aerospace Industrial

-0.56

Correlation Coefficient

Citigroup  Aerospace Industrial

Excellent diversification

The 3 months correlation between Citigroup and Aerospace is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Aerospace Industrial Developme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace Industrial 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 Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Industrial has no effect on the direction of Citigroup i.e., Citigroup and Aerospace Industrial go up and down completely randomly.

Pair Corralation between Citigroup and Aerospace Industrial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.6 times more return on investment than Aerospace Industrial. However, Citigroup is 1.6 times more volatile than Aerospace Industrial Development. It trades about 0.45 of its potential returns per unit of risk. Aerospace Industrial Development is currently generating about 0.15 per unit of risk. If you would invest  6,842  in Citigroup on October 20, 2024 and sell it today you would earn a total of  1,157  from holding Citigroup or generate 16.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

Citigroup  vs.  Aerospace Industrial Developme

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aerospace Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aerospace Industrial Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aerospace Industrial 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 Aerospace Industrial

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

The idea behind Citigroup and Aerospace Industrial Development 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.