Correlation Between Citigroup and Alkemy Capital

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

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

Diversification Opportunities for Citigroup and Alkemy Capital

0.85

Correlation Coefficient

Citigroup  Alkemy Capital

Very poor diversification

The 3 months correlation between Citigroup and Alkemy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Alkemy Capital Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkemy Capital Inves 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 Alkemy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkemy Capital Inves has no effect on the direction of Citigroup i.e., Citigroup and Alkemy Capital go up and down completely randomly.

Pair Corralation between Citigroup and Alkemy Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 11.04 times less return on investment than Alkemy Capital. But when comparing it to its historical volatility, Citigroup is 8.15 times less risky than Alkemy Capital. It trades about 0.14 of its potential returns per unit of risk. Alkemy Capital Investments is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,600  in Alkemy Capital Investments on October 3, 2024 and sell it today you would earn a total of  9,150  from holding Alkemy Capital Investments or generate 254.17% return on investment over 90 days.

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

Citigroup  vs.  Alkemy Capital Investments

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.

Alkemy Capital Inves

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkemy Capital Investments are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Alkemy Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Alkemy Capital

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

The idea behind Citigroup and Alkemy Capital Investments 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.