Correlation Between Citigroup and Adriatic Metals

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

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

Diversification Opportunities for Citigroup and Adriatic Metals

0.22

Correlation Coefficient

Citigroup  Adriatic Metals

Modest diversification

The 3 months correlation between Citigroup and Adriatic is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Adriatic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals 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 Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals has no effect on the direction of Citigroup i.e., Citigroup and Adriatic Metals go up and down completely randomly.

Pair Corralation between Citigroup and Adriatic Metals

Taking into account the 90-day investment horizon Citigroup is expected to generate 8.05 times less return on investment than Adriatic Metals. But when comparing it to its historical volatility, Citigroup is 1.11 times less risky than Adriatic Metals. It trades about 0.01 of its potential returns per unit of risk. Adriatic Metals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  19,040  in Adriatic Metals on December 31, 2024 and sell it today you would earn a total of  2,810  from holding Adriatic Metals or generate 14.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Citigroup  vs.  Adriatic Metals

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) 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.

Adriatic Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Adriatic Metals

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

The idea behind Citigroup and Adriatic Metals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.