Correlation Between Citigroup and Sercomm Corp

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

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

Diversification Opportunities for Citigroup and Sercomm Corp

0.3

Correlation Coefficient

Citigroup  Sercomm Corp

Weak diversification

The 3 months correlation between Citigroup and Sercomm is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sercomm Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sercomm Corp 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 Sercomm Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sercomm Corp has no effect on the direction of Citigroup i.e., Citigroup and Sercomm Corp go up and down completely randomly.

Pair Corralation between Citigroup and Sercomm Corp

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.84 times more return on investment than Sercomm Corp. However, Citigroup is 1.19 times less risky than Sercomm Corp. It trades about 0.03 of its potential returns per unit of risk. Sercomm Corp is currently generating about 0.02 per unit of risk. If you would invest  6,991  in Citigroup on December 29, 2024 and sell it today you would earn a total of  194.00  from holding Citigroup or generate 2.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

Citigroup  vs.  Sercomm Corp

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) 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.

Sercomm Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sercomm Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Sercomm Corp 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 Sercomm Corp

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

The idea behind Citigroup and Sercomm Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.