Correlation Between Citigroup and Dow

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

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

Diversification Opportunities for Citigroup and Dow

-0.87

Correlation Coefficient

Citigroup  Dow

Pay attention - limited upside

The 3 months correlation between Citigroup and Dow is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Dow Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Inc 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 Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Inc has no effect on the direction of Citigroup i.e., Citigroup and Dow go up and down completely randomly.

Pair Corralation between Citigroup and Dow

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.01 times more return on investment than Dow. However, Citigroup is 1.01 times more volatile than Dow Inc. It trades about -0.02 of its potential returns per unit of risk. Dow Inc is currently generating about -0.18 per unit of risk. If you would invest  7,196  in Citigroup on October 12, 2024 and sell it today you would lose (56.00) from holding Citigroup or give up 0.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.0%
Values	Daily Returns

Citigroup  vs.  Dow Inc

Citigroup

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 6 (%) 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 February 2025.

Dow Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dow Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and Dow

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

The idea behind Citigroup and Dow Inc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.