Correlation Between Citigroup and Playmates Toys

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

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

Diversification Opportunities for Citigroup and Playmates Toys

-0.45

Correlation Coefficient

Citigroup  Playmates Toys

Very good diversification

The 3 months correlation between Citigroup and Playmates is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Playmates Toys Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playmates Toys 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 Playmates Toys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playmates Toys has no effect on the direction of Citigroup i.e., Citigroup and Playmates Toys go up and down completely randomly.

Pair Corralation between Citigroup and Playmates Toys

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.16 times more return on investment than Playmates Toys. However, Citigroup is 6.35 times less risky than Playmates Toys. It trades about 0.41 of its potential returns per unit of risk. Playmates Toys Limited is currently generating about 0.04 per unit of risk. If you would invest  6,977  in Citigroup on October 23, 2024 and sell it today you would earn a total of  1,022  from holding Citigroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

Citigroup  vs.  Playmates Toys Limited

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Playmates Toys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Playmates Toys Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Playmates Toys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Playmates Toys

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

The idea behind Citigroup and Playmates Toys Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.