Correlation Between Citigroup and Cognyte Software

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

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

Diversification Opportunities for Citigroup and Cognyte Software

0.81

Correlation Coefficient

Citigroup  Cognyte Software

Very poor diversification

The 3 months correlation between Citigroup and Cognyte is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cognyte Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognyte Software 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 Cognyte Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognyte Software has no effect on the direction of Citigroup i.e., Citigroup and Cognyte Software go up and down completely randomly.

Pair Corralation between Citigroup and Cognyte Software

Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Cognyte Software. But the stock apears to be less risky and, when comparing its historical volatility, Citigroup is 1.75 times less risky than Cognyte Software. The stock trades about -0.04 of its potential returns per unit of risk. The Cognyte Software is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  904.00  in Cognyte Software on November 28, 2024 and sell it today you would lose (6.00) from holding Cognyte Software or give up 0.66% of portfolio value over 90 days.

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

Citigroup  vs.  Cognyte Software

Citigroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 10 (%) 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.

Cognyte Software

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cognyte Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cognyte Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Cognyte Software

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

The idea behind Citigroup and Cognyte Software 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.