Correlation Between Citigroup and COMPASS PATHW

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

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

Diversification Opportunities for Citigroup and COMPASS PATHW

0.51

Correlation Coefficient

Citigroup  COMPASS PATHW

Very weak diversification

The 3 months correlation between Citigroup and COMPASS is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and COMPASS PATHW SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMPASS PATHW SPADR 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 COMPASS PATHW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMPASS PATHW SPADR has no effect on the direction of Citigroup i.e., Citigroup and COMPASS PATHW go up and down completely randomly.

Pair Corralation between Citigroup and COMPASS PATHW

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.31 times more return on investment than COMPASS PATHW. However, Citigroup is 3.21 times less risky than COMPASS PATHW. It trades about 0.04 of its potential returns per unit of risk. COMPASS PATHW SPADR is currently generating about -0.03 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.97% return on investment over 90 days.

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

Citigroup  vs.  COMPASS PATHW SPADR

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.

COMPASS PATHW SPADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days COMPASS PATHW SPADR 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Citigroup and COMPASS PATHW

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

The idea behind Citigroup and COMPASS PATHW SPADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.