Correlation Between Citigroup and Bayside Corp

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

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

Diversification Opportunities for Citigroup and Bayside Corp

-0.08

Correlation Coefficient

Citigroup  Bayside Corp

Good diversification

The 3 months correlation between Citigroup and Bayside is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Bayside Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayside Corp 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 Bayside Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayside Corp has no effect on the direction of Citigroup i.e., Citigroup and Bayside Corp go up and down completely randomly.

Pair Corralation between Citigroup and Bayside Corp

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.16 times more return on investment than Bayside Corp. However, Citigroup is 6.42 times less risky than Bayside Corp. It trades about 0.04 of its potential returns per unit of risk. Bayside Corp is currently generating about 0.01 per unit of risk. If you would invest  6,871  in Citigroup on December 20, 2024 and sell it today you would earn a total of  273.00  from holding Citigroup or generate 3.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Citigroup  vs.  Bayside Corp

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Bayside Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Citigroup and Bayside Corp

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

The idea behind Citigroup and Bayside Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.