Correlation Between Citigroup and Sprott Physical

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

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

Diversification Opportunities for Citigroup and Sprott Physical

-0.5

Correlation Coefficient

Citigroup  Sprott Physical

Very good diversification

The 3 months correlation between Citigroup and Sprott is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of Citigroup i.e., Citigroup and Sprott Physical go up and down completely randomly.

Pair Corralation between Citigroup and Sprott Physical

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.34 times more return on investment than Sprott Physical. However, Citigroup is 1.34 times more volatile than Sprott Physical Gold. It trades about 0.1 of its potential returns per unit of risk. Sprott Physical Gold is currently generating about 0.08 per unit of risk. If you would invest  4,397  in Citigroup on October 24, 2024 and sell it today you would earn a total of  3,602  from holding Citigroup or generate 81.92% return on investment over 90 days.

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

Citigroup  vs.  Sprott Physical Gold

Citigroup

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 18 (%) 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.

Sprott Physical Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sprott Physical Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sprott Physical is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Citigroup and Sprott Physical

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

The idea behind Citigroup and Sprott Physical Gold 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.