Correlation Between Citigroup and Ares AcquisitionII

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

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

Diversification Opportunities for Citigroup and Ares AcquisitionII

0.14

Correlation Coefficient

Citigroup  Ares AcquisitionII

Average diversification

The 3 months correlation between Citigroup and Ares is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares AcquisitionII 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 Ares AcquisitionII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares AcquisitionII has no effect on the direction of Citigroup i.e., Citigroup and Ares AcquisitionII go up and down completely randomly.

Pair Corralation between Citigroup and Ares AcquisitionII

Taking into account the 90-day investment horizon Citigroup is expected to generate 3.88 times more return on investment than Ares AcquisitionII. However, Citigroup is 3.88 times more volatile than Ares Acquisition. It trades about 0.08 of its potential returns per unit of risk. Ares Acquisition is currently generating about 0.05 per unit of risk. If you would invest  4,558  in Citigroup on October 3, 2024 and sell it today you would earn a total of  2,481  from holding Citigroup or generate 54.43% return on investment over 90 days.

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

Citigroup  vs.  Ares Acquisition

Citigroup

Risk-Adjusted Performance

10 of 100

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

Ares AcquisitionII

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares AcquisitionII is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Ares AcquisitionII

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

The idea behind Citigroup and Ares Acquisition 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.