Correlation Between Citigroup and COMPUTER MODELLING

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

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

Diversification Opportunities for Citigroup and COMPUTER MODELLING

-0.63

Correlation Coefficient

Citigroup  COMPUTER MODELLING

Excellent diversification

The 3 months correlation between Citigroup and COMPUTER is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and COMPUTER MODELLING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPUTER MODELLING 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 COMPUTER MODELLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPUTER MODELLING has no effect on the direction of Citigroup i.e., Citigroup and COMPUTER MODELLING go up and down completely randomly.

Pair Corralation between Citigroup and COMPUTER MODELLING

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.56 times more return on investment than COMPUTER MODELLING. However, Citigroup is 10.56 times more volatile than COMPUTER MODELLING. It trades about 0.04 of its potential returns per unit of risk. COMPUTER MODELLING is currently generating about 0.07 per unit of risk. If you would invest  6,929  in Citigroup on December 22, 2024 and sell it today you would earn a total of  269.00  from holding Citigroup or generate 3.88% return on investment over 90 days.

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

Citigroup  vs.  COMPUTER MODELLING

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

COMPUTER MODELLING

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in COMPUTER MODELLING are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, COMPUTER MODELLING is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and COMPUTER MODELLING

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

The idea behind Citigroup and COMPUTER MODELLING 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.