Correlation Between Citigroup and Bowler Metcalf

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

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

Diversification Opportunities for Citigroup and Bowler Metcalf

0.43

Correlation Coefficient

Citigroup  Bowler Metcalf

Very weak diversification

The 3 months correlation between Citigroup and Bowler is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bowler Metcalf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowler Metcalf 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 Bowler Metcalf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowler Metcalf has no effect on the direction of Citigroup i.e., Citigroup and Bowler Metcalf go up and down completely randomly.

Pair Corralation between Citigroup and Bowler Metcalf

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.92 times more return on investment than Bowler Metcalf. However, Citigroup is 1.09 times less risky than Bowler Metcalf. It trades about -0.09 of its potential returns per unit of risk. Bowler Metcalf is currently generating about -0.09 per unit of risk. If you would invest  7,075  in Citigroup on September 25, 2024 and sell it today you would lose (156.00) from holding Citigroup or give up 2.2% of portfolio value over 90 days.

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

Citigroup  vs.  Bowler Metcalf

Citigroup

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bowler Metcalf

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bowler Metcalf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bowler Metcalf may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citigroup and Bowler Metcalf

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

The idea behind Citigroup and Bowler Metcalf 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.