Correlation Between Citigroup and Black Spade

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

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

Diversification Opportunities for Citigroup and Black Spade

0.74

Correlation Coefficient

Citigroup  Black Spade

Poor diversification

The 3 months correlation between Citigroup and Black is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Black Spade Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Spade Acquisition 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 Black Spade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Spade Acquisition has no effect on the direction of Citigroup i.e., Citigroup and Black Spade go up and down completely randomly.

Pair Corralation between Citigroup and Black Spade

Taking into account the 90-day investment horizon Citigroup is expected to generate 5.7 times more return on investment than Black Spade. However, Citigroup is 5.7 times more volatile than Black Spade Acquisition. It trades about 0.17 of its potential returns per unit of risk. Black Spade Acquisition is currently generating about 0.08 per unit of risk. If you would invest  6,341  in Citigroup on September 17, 2024 and sell it today you would earn a total of  808.00  from holding Citigroup or generate 12.74% return on investment over 90 days.

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

Citigroup  vs.  Black Spade Acquisition

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.

Black Spade Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Spade Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Black Spade is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Black Spade

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

The idea behind Citigroup and Black Spade Acquisition 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.