Correlation Between Citigroup and Blue Whale

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

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

Diversification Opportunities for Citigroup and Blue Whale

0.81

Correlation Coefficient

Citigroup  Blue Whale

Very poor diversification

The 3 months correlation between Citigroup and Blue is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Blue Whale Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Whale 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 Blue Whale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Whale Acquisition has no effect on the direction of Citigroup i.e., Citigroup and Blue Whale go up and down completely randomly.

Pair Corralation between Citigroup and Blue Whale

If you would invest  6,900  in Citigroup on September 17, 2024 and sell it today you would earn a total of  249.00  from holding Citigroup or generate 3.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

Citigroup  vs.  Blue Whale 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.

Blue Whale Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Whale Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Blue Whale is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citigroup and Blue Whale

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

The idea behind Citigroup and Blue Whale 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.