Correlation Between Citigroup and Sterling Capital

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

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

Diversification Opportunities for Citigroup and Sterling Capital

0.33

Correlation Coefficient

Citigroup  Sterling Capital

Weak diversification

The 3 months correlation between Citigroup and Sterling is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sterling Capital Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Special 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Special has no effect on the direction of Citigroup i.e., Citigroup and Sterling Capital go up and down completely randomly.

Pair Corralation between Citigroup and Sterling Capital

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.65 times more return on investment than Sterling Capital. However, Citigroup is 1.54 times less risky than Sterling Capital. It trades about 0.17 of its potential returns per unit of risk. Sterling Capital Special is currently generating about -0.08 per unit of risk. If you would invest  5,877  in Citigroup on September 17, 2024 and sell it today you would earn a total of  1,224  from holding Citigroup or generate 20.83% return on investment over 90 days.

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

Citigroup  vs.  Sterling Capital Special

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Sterling Capital Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Capital Special has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Citigroup and Sterling Capital

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

The idea behind Citigroup and Sterling Capital Special 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.