Correlation Between Citigroup and Rainbow Robotics

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

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

Diversification Opportunities for Citigroup and Rainbow Robotics

0.53

Correlation Coefficient

Citigroup  Rainbow Robotics

Very weak diversification

The 3 months correlation between Citigroup and Rainbow is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Rainbow Robotics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rainbow Robotics 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 Rainbow Robotics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rainbow Robotics has no effect on the direction of Citigroup i.e., Citigroup and Rainbow Robotics go up and down completely randomly.

Pair Corralation between Citigroup and Rainbow Robotics

Taking into account the 90-day investment horizon Citigroup is expected to generate 35.06 times less return on investment than Rainbow Robotics. But when comparing it to its historical volatility, Citigroup is 3.19 times less risky than Rainbow Robotics. It trades about 0.01 of its potential returns per unit of risk. Rainbow Robotics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16,270,000  in Rainbow Robotics on December 30, 2024 and sell it today you would earn a total of  10,480,000  from holding Rainbow Robotics or generate 64.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

Citigroup  vs.  Rainbow Robotics

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rainbow Robotics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rainbow Robotics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rainbow Robotics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Rainbow Robotics

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

The idea behind Citigroup and Rainbow Robotics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.