Correlation Between Citigroup and CHS

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

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

Diversification Opportunities for Citigroup and CHS

0.41

Correlation Coefficient

Citigroup  CHS

Very weak diversification

The 3 months correlation between Citigroup and CHS is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and CHS Inc CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CL 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 CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CL has no effect on the direction of Citigroup i.e., Citigroup and CHS go up and down completely randomly.

Pair Corralation between Citigroup and CHS

Taking into account the 90-day investment horizon Citigroup is expected to generate 2.95 times more return on investment than CHS. However, Citigroup is 2.95 times more volatile than CHS Inc CL. It trades about 0.07 of its potential returns per unit of risk. CHS Inc CL is currently generating about 0.05 per unit of risk. If you would invest  4,237  in Citigroup on September 4, 2024 and sell it today you would earn a total of  2,905  from holding Citigroup or generate 68.56% return on investment over 90 days.

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

Citigroup  vs.  CHS Inc CL

Citigroup

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 11 (%) 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.

CHS Inc CL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHS Inc CL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, CHS is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citigroup and CHS

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

The idea behind Citigroup and CHS Inc CL 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.