Correlation Between Citigroup and Banks Ultrasector

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

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

Diversification Opportunities for Citigroup and Banks Ultrasector

0.88

Correlation Coefficient

Citigroup  Banks Ultrasector

Very poor diversification

The 3 months correlation between Citigroup and Banks is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Banks Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banks Ultrasector Profund 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 Banks Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banks Ultrasector Profund has no effect on the direction of Citigroup i.e., Citigroup and Banks Ultrasector go up and down completely randomly.

Pair Corralation between Citigroup and Banks Ultrasector

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.07 times less return on investment than Banks Ultrasector. But when comparing it to its historical volatility, Citigroup is 1.69 times less risky than Banks Ultrasector. It trades about 0.07 of its potential returns per unit of risk. Banks Ultrasector Profund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,280  in Banks Ultrasector Profund on September 20, 2024 and sell it today you would earn a total of  2,183  from holding Banks Ultrasector Profund or generate 51.0% return on investment over 90 days.

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

Citigroup  vs.  Banks Ultrasector Profund

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

Banks Ultrasector Profund

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banks Ultrasector Profund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Banks Ultrasector showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Banks Ultrasector

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

The idea behind Citigroup and Banks Ultrasector Profund 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.