Correlation Between Citigroup and Abacus Life

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

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

Diversification Opportunities for Citigroup and Abacus Life

-0.42

Correlation Coefficient

Citigroup  Abacus Life

Very good diversification

The 3 months correlation between Citigroup and Abacus is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Abacus Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abacus Life 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 Abacus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abacus Life has no effect on the direction of Citigroup i.e., Citigroup and Abacus Life go up and down completely randomly.

Pair Corralation between Citigroup and Abacus Life

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.88 times less return on investment than Abacus Life. But when comparing it to its historical volatility, Citigroup is 3.06 times less risky than Abacus Life. It trades about 0.03 of its potential returns per unit of risk. Abacus Life is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  106.00  in Abacus Life on December 29, 2024 and sell it today you would earn a total of  41.00  from holding Abacus Life or generate 38.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Citigroup  vs.  Abacus Life

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.

Abacus Life

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Abacus Life are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Abacus Life showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Abacus Life

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

The idea behind Citigroup and Abacus Life 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.