Correlation Between Citigroup and American Business

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

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

Diversification Opportunities for Citigroup and American Business

0.52

Correlation Coefficient

Citigroup  American Business

Very weak diversification

The 3 months correlation between Citigroup and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business 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 American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Citigroup i.e., Citigroup and American Business go up and down completely randomly.

Pair Corralation between Citigroup and American Business

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.19 times more return on investment than American Business. However, Citigroup is 1.19 times more volatile than American Business Bk. It trades about 0.13 of its potential returns per unit of risk. American Business Bk is currently generating about -0.01 per unit of risk. If you would invest  7,038  in Citigroup on November 28, 2024 and sell it today you would earn a total of  869.00  from holding Citigroup or generate 12.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Citigroup  vs.  American Business Bk

Citigroup

Risk-Adjusted Performance

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Business

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Business Bk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, American Business is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and American Business

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

The idea behind Citigroup and American Business Bk 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.