Correlation Between Citigroup and Heritage Fund

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

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

Diversification Opportunities for Citigroup and Heritage Fund

0.95

Correlation Coefficient

Citigroup  Heritage Fund

Almost no diversification

The 3 months correlation between Citigroup and Heritage is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Heritage Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Fund A 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 Heritage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Fund A has no effect on the direction of Citigroup i.e., Citigroup and Heritage Fund go up and down completely randomly.

Pair Corralation between Citigroup and Heritage Fund

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.72 times more return on investment than Heritage Fund. However, Citigroup is 1.72 times more volatile than Heritage Fund A. It trades about 0.1 of its potential returns per unit of risk. Heritage Fund A is currently generating about 0.15 per unit of risk. If you would invest  5,825  in Citigroup on September 12, 2024 and sell it today you would earn a total of  1,425  from holding Citigroup or generate 24.46% return on investment over 90 days.

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

Citigroup  vs.  Heritage Fund A

Citigroup

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 16 (%) 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.

Heritage Fund A

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Fund A are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Heritage Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Heritage Fund

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

The idea behind Citigroup and Heritage Fund A 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.