Correlation Between Citigroup and Baron Durable

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

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

Diversification Opportunities for Citigroup and Baron Durable

0.85

Correlation Coefficient

Citigroup  Baron Durable

Very poor diversification

The 3 months correlation between Citigroup and Baron is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Baron Durable Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Durable Advantage 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 Baron Durable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Durable Advantage has no effect on the direction of Citigroup i.e., Citigroup and Baron Durable go up and down completely randomly.

Pair Corralation between Citigroup and Baron Durable

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.03 times less return on investment than Baron Durable. In addition to that, Citigroup is 1.6 times more volatile than Baron Durable Advantage. It trades about 0.08 of its total potential returns per unit of risk. Baron Durable Advantage is currently generating about 0.13 per unit of volatility. If you would invest  1,548  in Baron Durable Advantage on October 9, 2024 and sell it today you would earn a total of  1,385  from holding Baron Durable Advantage or generate 89.47% return on investment over 90 days.

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

Citigroup  vs.  Baron Durable Advantage

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 unfluctuating fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

Baron Durable Advantage

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Durable Advantage are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Baron Durable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and Baron Durable

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

The idea behind Citigroup and Baron Durable Advantage 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.