Correlation Between Citigroup and Ampleforth

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

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

Diversification Opportunities for Citigroup and Ampleforth

0.3

Correlation Coefficient

Citigroup  Ampleforth

Weak diversification

The 3 months correlation between Citigroup and Ampleforth is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ampleforth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampleforth 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 Ampleforth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampleforth has no effect on the direction of Citigroup i.e., Citigroup and Ampleforth go up and down completely randomly.

Pair Corralation between Citigroup and Ampleforth

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.32 times less return on investment than Ampleforth. But when comparing it to its historical volatility, Citigroup is 2.86 times less risky than Ampleforth. It trades about 0.14 of its potential returns per unit of risk. Ampleforth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  97.00  in Ampleforth on September 4, 2024 and sell it today you would earn a total of  37.00  from holding Ampleforth or generate 38.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Citigroup  vs.  Ampleforth

Citigroup

Risk-Adjusted Performance

11 of 100

Good

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.

Ampleforth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ampleforth are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ampleforth exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Ampleforth

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

The idea behind Citigroup and Ampleforth 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 Transaction History module to view history of all your transactions and understand their impact on performance.