Correlation Between Citigroup and Archer Materials

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

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

Diversification Opportunities for Citigroup and Archer Materials

0.57

Correlation Coefficient

Citigroup  Archer Materials

Very weak diversification

The 3 months correlation between Citigroup and Archer is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Archer Materials Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Materials 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 Archer Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Materials has no effect on the direction of Citigroup i.e., Citigroup and Archer Materials go up and down completely randomly.

Pair Corralation between Citigroup and Archer Materials

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.2 times less return on investment than Archer Materials. But when comparing it to its historical volatility, Citigroup is 5.59 times less risky than Archer Materials. It trades about 0.13 of its potential returns per unit of risk. Archer Materials Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Archer Materials Limited on September 22, 2024 and sell it today you would earn a total of  7.00  from holding Archer Materials Limited or generate 38.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.56%
Values	Daily Returns

Citigroup  vs.  Archer Materials Limited

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Archer Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Materials Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Archer Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Archer Materials

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

The idea behind Citigroup and Archer Materials Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.