Correlation Between Citigroup and Brown Forman

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

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

Diversification Opportunities for Citigroup and Brown Forman

-0.53

Correlation Coefficient

Citigroup  Brown Forman

Excellent diversification

The 3 months correlation between Citigroup and Brown is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Brown Forman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brown Forman 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 Brown Forman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brown Forman has no effect on the direction of Citigroup i.e., Citigroup and Brown Forman go up and down completely randomly.

Pair Corralation between Citigroup and Brown Forman

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.03 times more return on investment than Brown Forman. However, Citigroup is 1.03 times more volatile than Brown Forman. It trades about 0.07 of its potential returns per unit of risk. Brown Forman is currently generating about -0.04 per unit of risk. If you would invest  4,219  in Citigroup on September 22, 2024 and sell it today you would earn a total of  2,700  from holding Citigroup or generate 64.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.83%
Values	Daily Returns

Citigroup  vs.  Brown Forman

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 unsteady fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Brown Forman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brown Forman is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Citigroup and Brown Forman

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

The idea behind Citigroup and Brown Forman 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.