Correlation Between Citigroup and Contact Financial

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

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

Diversification Opportunities for Citigroup and Contact Financial

0.61

Correlation Coefficient

Citigroup  Contact Financial

Poor diversification

The 3 months correlation between Citigroup and Contact is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Contact Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Contact Financial Holding 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 Contact Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Contact Financial Holding has no effect on the direction of Citigroup i.e., Citigroup and Contact Financial go up and down completely randomly.

Pair Corralation between Citigroup and Contact Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 0.44 times more return on investment than Contact Financial. However, Citigroup is 2.25 times less risky than Contact Financial. It trades about 0.18 of its potential returns per unit of risk. Contact Financial Holding is currently generating about 0.06 per unit of risk. If you would invest  5,788  in Citigroup on September 16, 2024 and sell it today you would earn a total of  1,313  from holding Citigroup or generate 22.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	81.54%
Values	Daily Returns

Citigroup  vs.  Contact Financial Holding

Citigroup

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 13 (%) 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.

Contact Financial Holding

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Contact Financial Holding are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Contact Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Contact Financial

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

The idea behind Citigroup and Contact Financial Holding 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.