Correlation Between Citigroup and Ames National

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

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

Diversification Opportunities for Citigroup and Ames National

-0.13

Correlation Coefficient

Citigroup  Ames National

Good diversification

The 3 months correlation between Citigroup and Ames is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Ames National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ames National 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 Ames National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ames National has no effect on the direction of Citigroup i.e., Citigroup and Ames National go up and down completely randomly.

Pair Corralation between Citigroup and Ames National

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.87 times more return on investment than Ames National. However, Citigroup is 1.15 times less risky than Ames National. It trades about 0.24 of its potential returns per unit of risk. Ames National is currently generating about 0.03 per unit of risk. If you would invest  6,129  in Citigroup on October 20, 2024 and sell it today you would earn a total of  1,870  from holding Citigroup or generate 30.51% return on investment over 90 days.

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

Citigroup  vs.  Ames National

Citigroup

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 19 (%) 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.

Ames National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ames National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Ames National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Ames National

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

The idea behind Citigroup and Ames National 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.