Correlation Between Citigroup and INTERNATIONAL METALS

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

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

Diversification Opportunities for Citigroup and INTERNATIONAL METALS

0.28

Correlation Coefficient

Citigroup  INTERNATIONAL METALS

Modest diversification

The 3 months correlation between Citigroup and INTERNATIONAL is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and INTERNATIONAL METALS MIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERNATIONAL METALS MIN 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 INTERNATIONAL METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERNATIONAL METALS MIN has no effect on the direction of Citigroup i.e., Citigroup and INTERNATIONAL METALS go up and down completely randomly.

Pair Corralation between Citigroup and INTERNATIONAL METALS

Taking into account the 90-day investment horizon Citigroup is expected to generate 283.9 times less return on investment than INTERNATIONAL METALS. But when comparing it to its historical volatility, Citigroup is 133.42 times less risky than INTERNATIONAL METALS. It trades about 0.11 of its potential returns per unit of risk. INTERNATIONAL METALS MIN is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  14.00  in INTERNATIONAL METALS MIN on September 21, 2024 and sell it today you would lose (12.60) from holding INTERNATIONAL METALS MIN or give up 90.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.9%
Values	Daily Returns

Citigroup  vs.  INTERNATIONAL METALS MIN

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INTERNATIONAL METALS MIN

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in INTERNATIONAL METALS MIN are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INTERNATIONAL METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and INTERNATIONAL METALS

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

The idea behind Citigroup and INTERNATIONAL METALS MIN 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.