Correlation Between Citigroup and AECI

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

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

Diversification Opportunities for Citigroup and AECI

-0.19

Correlation Coefficient

Citigroup  AECI

Good diversification

The 3 months correlation between Citigroup and AECI is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and AECI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AECI 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 AECI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AECI has no effect on the direction of Citigroup i.e., Citigroup and AECI go up and down completely randomly.

Pair Corralation between Citigroup and AECI

Taking into account the 90-day investment horizon Citigroup is expected to generate 91.05 times less return on investment than AECI. But when comparing it to its historical volatility, Citigroup is 68.87 times less risky than AECI. It trades about 0.07 of its potential returns per unit of risk. AECI is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,400  in AECI on October 10, 2024 and sell it today you would earn a total of  143,600  from holding AECI or generate 10257.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

Citigroup  vs.  AECI

Citigroup

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

AECI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AECI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Citigroup and AECI

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

The idea behind Citigroup and AECI 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.