Correlation Between Citigroup and WISE KTAM

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

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

Diversification Opportunities for Citigroup and WISE KTAM

0.08

Correlation Coefficient

Citigroup  WISE KTAM

Significant diversification

The 3 months correlation between Citigroup and WISE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and WISE KTAM CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WISE KTAM CSI 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 WISE KTAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WISE KTAM CSI has no effect on the direction of Citigroup i.e., Citigroup and WISE KTAM go up and down completely randomly.

Pair Corralation between Citigroup and WISE KTAM

Taking into account the 90-day investment horizon Citigroup is expected to generate 18.84 times less return on investment than WISE KTAM. But when comparing it to its historical volatility, Citigroup is 28.13 times less risky than WISE KTAM. It trades about 0.06 of its potential returns per unit of risk. WISE KTAM CSI is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  647.00  in WISE KTAM CSI on October 4, 2024 and sell it today you would lose (37.00) from holding WISE KTAM CSI or give up 5.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.97%
Values	Daily Returns

Citigroup  vs.  WISE KTAM CSI

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 unsteady fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

WISE KTAM CSI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WISE KTAM CSI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, WISE KTAM is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citigroup and WISE KTAM

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

The idea behind Citigroup and WISE KTAM CSI 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.