Correlation Between Citigroup and Amarc Resources
Can any of the company-specific risk be diversified away by investing in both Citigroup and Amarc Resources 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 Amarc Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Amarc Resources, you can compare the effects of market volatilities on Citigroup and Amarc Resources 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 Amarc Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Amarc Resources.
Diversification Opportunities for Citigroup and Amarc Resources
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Amarc is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Amarc Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarc Resources 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 Amarc Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarc Resources has no effect on the direction of Citigroup i.e., Citigroup and Amarc Resources go up and down completely randomly.
Pair Corralation between Citigroup and Amarc Resources
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.95 times less return on investment than Amarc Resources. But when comparing it to its historical volatility, Citigroup is 3.33 times less risky than Amarc Resources. It trades about 0.13 of its potential returns per unit of risk. Amarc Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Amarc Resources on September 29, 2024 and sell it today you would earn a total of 3.00 from holding Amarc Resources or generate 17.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.41% |
Values | Daily Returns |
Citigroup vs. Amarc Resources
Performance |
Timeline |
Citigroup |
Amarc Resources |
Citigroup and Amarc Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and Amarc Resources
The main advantage of trading using opposite Citigroup and Amarc Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Amarc Resources 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 Amarc Resources will offset losses from the drop in Amarc Resources' long position.The idea behind Citigroup and Amarc Resources 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.Amarc Resources vs. Eastfield Resources | ||
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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