Correlation Between Citigroup and C1MI34

Can any of the company-specific risk be diversified away by investing in both Citigroup and C1MI34 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 C1MI34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and C1MI34, you can compare the effects of market volatilities on Citigroup and C1MI34 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 C1MI34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and C1MI34.

Diversification Opportunities for Citigroup and C1MI34

0.77

Correlation Coefficient

Citigroup  C1MI34

Poor diversification

The 3 months correlation between Citigroup and C1MI34 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and C1MI34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C1MI34 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 C1MI34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C1MI34 has no effect on the direction of Citigroup i.e., Citigroup and C1MI34 go up and down completely randomly.

Pair Corralation between Citigroup and C1MI34

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.23 times less return on investment than C1MI34. But when comparing it to its historical volatility, Citigroup is 1.17 times less risky than C1MI34. It trades about 0.07 of its potential returns per unit of risk. C1MI34 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  30,429  in C1MI34 on September 24, 2024 and sell it today you would earn a total of  24,921  from holding C1MI34 or generate 81.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.4%
Values	Daily Returns

Citigroup  vs.  C1MI34

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

C1MI34

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in C1MI34 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, C1MI34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and C1MI34

The main advantage of trading using opposite Citigroup and C1MI34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, C1MI34 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 C1MI34 will offset losses from the drop in C1MI34's long position.

The idea behind Citigroup and C1MI34 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..