Correlation Between Citigroup and Coastal Financial

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

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

Diversification Opportunities for Citigroup and Coastal Financial

0.59

Correlation Coefficient

Citigroup  Coastal Financial

Very weak diversification

The 3 months correlation between Citigroup and Coastal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Coastal Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Financial 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 Coastal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Financial Corp has no effect on the direction of Citigroup i.e., Citigroup and Coastal Financial go up and down completely randomly.

Pair Corralation between Citigroup and Coastal Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.06 times less return on investment than Coastal Financial. But when comparing it to its historical volatility, Citigroup is 1.23 times less risky than Coastal Financial. It trades about 0.05 of its potential returns per unit of risk. Coastal Financial Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,460  in Coastal Financial Corp on December 25, 2024 and sell it today you would earn a total of  408.00  from holding Coastal Financial Corp or generate 4.82% return on investment over 90 days.

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

Citigroup  vs.  Coastal Financial Corp

Citigroup

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 4 (%) 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 April 2025.

Coastal Financial Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Financial Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Coastal Financial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Citigroup and Coastal Financial

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

The idea behind Citigroup and Coastal Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.