Correlation Between Citigroup and Gold Rain

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

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

Diversification Opportunities for Citigroup and Gold Rain

0.09

Correlation Coefficient

Citigroup  Gold Rain

Significant diversification

The 3 months correlation between Citigroup and Gold is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Gold Rain Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Rain Enterprises 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 Gold Rain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Rain Enterprises has no effect on the direction of Citigroup i.e., Citigroup and Gold Rain go up and down completely randomly.

Pair Corralation between Citigroup and Gold Rain

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.92 times more return on investment than Gold Rain. However, Citigroup is 1.08 times less risky than Gold Rain. It trades about 0.14 of its potential returns per unit of risk. Gold Rain Enterprises is currently generating about -0.02 per unit of risk. If you would invest  6,117  in Citigroup on September 26, 2024 and sell it today you would earn a total of  983.00  from holding Citigroup or generate 16.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Citigroup  vs.  Gold Rain Enterprises

Citigroup

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Gold Rain Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Citigroup and Gold Rain Enterprises 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 Transaction History module to view history of all your transactions and understand their impact on performance.