Correlation Between Citigroup and Arrow Reserve

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

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

Diversification Opportunities for Citigroup and Arrow Reserve

0.02

Correlation Coefficient

Citigroup  Arrow Reserve

Significant diversification

The 3 months correlation between Citigroup and Arrow is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Arrow Reserve Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Reserve Capital 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 Arrow Reserve. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Reserve Capital has no effect on the direction of Citigroup i.e., Citigroup and Arrow Reserve go up and down completely randomly.

Pair Corralation between Citigroup and Arrow Reserve

Taking into account the 90-day investment horizon Citigroup is expected to generate 77.82 times more return on investment than Arrow Reserve. However, Citigroup is 77.82 times more volatile than Arrow Reserve Capital. It trades about 0.01 of its potential returns per unit of risk. Arrow Reserve Capital is currently generating about 0.66 per unit of risk. If you would invest  6,991  in Citigroup on December 28, 2024 and sell it today you would earn a total of  42.00  from holding Citigroup or generate 0.6% return on investment over 90 days.

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

Citigroup  vs.  Arrow Reserve Capital

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arrow Reserve Capital

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Reserve Capital are ranked lower than 51 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Arrow Reserve is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Arrow Reserve

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

The idea behind Citigroup and Arrow Reserve Capital 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.