Correlation Between Citigroup and Eastern Communications

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

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

Diversification Opportunities for Citigroup and Eastern Communications

-0.45

Correlation Coefficient

Citigroup  Eastern Communications

Very good diversification

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

Pair Corralation between Citigroup and Eastern Communications

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Eastern Communications. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.41 times less risky than Eastern Communications. The stock trades about -0.04 of its potential returns per unit of risk. The Eastern Communications Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Eastern Communications Co on December 1, 2024 and sell it today you would earn a total of  1.00  from holding Eastern Communications Co or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Citigroup  vs.  Eastern Communications Co

Citigroup

Risk-Adjusted Performance

OK

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Eastern Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eastern Communications Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Eastern Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Eastern Communications

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

The idea behind Citigroup and Eastern Communications Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.