Correlation Between Citigroup and Scepter Holdings

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

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

Diversification Opportunities for Citigroup and Scepter Holdings

0.11

Correlation Coefficient

Citigroup  Scepter Holdings

Average diversification

The 3 months correlation between Citigroup and Scepter is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Scepter Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scepter Holdings 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 Scepter Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scepter Holdings has no effect on the direction of Citigroup i.e., Citigroup and Scepter Holdings go up and down completely randomly.

Pair Corralation between Citigroup and Scepter Holdings

Taking into account the 90-day investment horizon Citigroup is expected to generate 10.88 times less return on investment than Scepter Holdings. But when comparing it to its historical volatility, Citigroup is 11.82 times less risky than Scepter Holdings. It trades about 0.13 of its potential returns per unit of risk. Scepter Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.07  in Scepter Holdings on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Scepter Holdings or generate 0.0% return on investment over 90 days.

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

Citigroup  vs.  Scepter Holdings

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.

Scepter Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scepter Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Scepter Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Scepter Holdings

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

The idea behind Citigroup and Scepter Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.